Preamble

The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.

PRIVATE BUSINESS.

Marriages Provisional Orders Bill,

Nottinghamshire and Derbyshire Traction Company (Trolley Vehicles) Provisional Order Bill,

Read the Third time, and passed.

Oral Answers to Questions — CHINA (FOREIGN LOANS).

Mr. BURNETT: 1.
asked the Secretary of State for Foreign Affairs whether the Government of Manchukuo on its formation undertook to pay the quota due from Manchuria for the service of foreign loans secured on the Chinese Customs; and when the last payment was made?

The SECRETARY of STATE for FOREIGN AFFAIRS (Sir John Simon): As stated in the reply to the hon. and gallant Member for the Isle of Wight (Captain P. Macdonald) on 24th October last, the Manchurian authorities declared their intention of paying to the Chinese authorities a quota towards the service of foreign loans secured on the Chinese Customs revenues. Remittances were, I understand, made in July and September last out of th revenues which had accumulated up to the time of the seizure of the Customs in Manchuria, but I have no information of subsequent payments.

Mr. BURNETT: Will the right hon. Gentleman do his best to get the matter pressed, in view of the fact that the exports and imports of Manchuria represented something over a quarter of China's trade?

Sir J. SIMON: Those are certainly very important facts, but the hon. Member will have in mind, of course, that the Chinese Government remain responsible for the service of the loan.

Oral Answers to Questions — GERMANY.

Colonel WEDGWOOD: 2.
asked the Secretary of State for Foreign Affairs whether the decision made at Geneva, on 22nd May, not to include the Nazi auxiliary police in the German effective quota had the support of His Majesty's Government; and, if so, on what grounds?

Sir J. SIMON: There is, I think, some misapprehension about this matter which I will try to remove. The Nazi auxiliary detachments have actually been included in the German effectives quota on the ground that they receive military training. The decision taken in the Effectives Committee on 22nd May was not a decision that they should not be so included, but was a decision that they should not be included in the special category of "militarised police." This decision was carried by eight votes to six with a number of abstentions. The grounds on which the United Kingdom representative voted for their exclusion from this special category were as follows:—(1) These auxiliary police did not conform to the criteria which had been agreed upon for computing police forces as effectives. (2) As these same detachments had already been included in the German effectives they could not be counted over again. (3) The German Chancellor had declared, and the German Delegation confirmed, that the enlistment of the Nazi detachments as auxiliary police was a temporary expedient to deal with a temporary emergency, that they were already being reduced, and would cease to operate as police by the end of the year.

Mr. COCKS: 5.
asked the Secretary of State for Foreign Affairs whether he has any information concerning the present situation regarding the fulfilment, or otherwise, by Germany of her obligations under the military clauses of the Treaty of Versailles, particularly in regard to the manufacture of heavy guns of a calibre not permitted by that Treaty?

Sir J. SIMON: There is no information that I can give the House on this subject.

Mr. COCKS: Does that mean that the right hon. Gentleman has no reports?

Sir J. SIMON: The hon. Member may rest assured that the Government are not
losing sight of the question, but I must ask him to accept the answer that I have given.

Oral Answers to Questions — CONSULAR SERVICE.

Lieut.-Colonel GAULT: 3.
asked the Secretary of State for Foreign Affairs if he will state the total annual amounts by which the cost to the taxpayer of the British Consular service has been reduced during the last 10 years by the fees and other revenues received from Canadian ships and Canadian nationals?

Sir J. SIMON: I regret that the information is not available. Consular records do not show the nationality of persons paying Consular fees.

Oral Answers to Questions — PERU AND COLOMBIA.

Mr. MANDER: 4.
asked the Secretary of State for Foreign Affairs if he will state the present position with regard to the dispute between Peru and Colombia; and whether the League of Nations has yet been able to bring about a settlement?

Sir J. SIMON: I am glad to be able to announce that on 25th May an agreement for the settlement of the dispute between Peru and Colombia was signed at Geneva by the delegates of those two countries. This agreement is based on a formula adopted by the Advisory Committee of the League on 10th May. It provides for the immediate cessation of hostilities, and for the despatch to Leticia within the next 30 days of a commission nominated by the Council. This commission will, in the name of Colombia, take over the administration of the territory evacuated by the Peruvian forces, and will carry on its task for a period not exceeding one year, during which negotiations will take place between the parties for a final settlement of the dispute.

Oral Answers to Questions — EUROPEAN SITUATION.

Mr. COCKS: 6.
asked the Secretary of State for Foreign Affairs whether he is now in a position to publish papers relating to the Four Power Pact?

Sir J. SIMON: I hope to be able to lay papers—probably to-morrow.

Oral Answers to Questions — CHINA AND JAPAN.

Mr. COCKS: 7.
asked the Secretary of State for Foreign Affairs whether His Majesty's Government proposes to take any action, or to propose any action, to the Council of the League of Nations against the aggressor in the Sino-Japanese conflict?

Sir J. SIMON: The initiative in this matter lies with the advisory committee appointed by the Assembly of the League of Nations.

Mr. COCKS: Does this meant that no action is to be taken, and, if so, does it not show the futility of not deciding which is the aggressor nation until many months after the aggression, and would it not be better to draw up beforehand a definition of what constitutes aggression so that these cases could be decided at the time?

Sir J. SIMON: I think it is open to grave doubt whether the advisory committee would be able to act more promptly.

Sir NAIRNE STEWART SANDEMAN: When are we going to recognise the new State?

Mr. MANDER: Does this mean that the Government do not take their obligations seriously under the Covenant?

Oral Answers to Questions — ROYAL NAVY.

COBDITB FACTORY, HOLTON HEATH (EMPLOYES).

Mr. HALL-CALNE: 8.
asked the First Lord of the Admiralty whether his attention has been called to the hardship caused to the large number of unestablished men who are compelled to give up employment in the Royal Naval Cordite Factory, Holton Heath, on attaining the age of 60; and whether, in view of the fact that these men are not pensionable and cannot qualify for old age pensions until 65, he will consider making arrangements to provide either for the retention of these men until 65 or for them to qualify for pensions until that age?

The FIRST LORD of the ADMIRALTY (Sir Bolton Eyres Monsell): The regulation for Admiralty industrial establishments is that workpeople are as a rule to be pensioned or discharged on reaching 60 years of age, but they may be retained until 65 if recommended annually for retention and certified to be medically fit. No sufficient reason is seen for introducing a special rule, or alternatively, a special scheme of pensions as proposed, for the employés in the Royal Naval Cordite Factory.

REAR-ADMIRAL-IN-CHARGE, GIBRALTAR.

Mr. TOM SMITH: 10.
asked the First Lord of the Admiralty what are the duties of the rear-admiral-in-charge, Gibraltar, and admiral-superintendent of Gibraltar dockyard; the staff allowed, officers and ratings; and the annual cost for salaries and expenses of officers and ratings?

Sir B. EYRES MONSELL: The officer holding the appointment of rear-admiral-in-charge and admiral-superintendent, Gibraltar, is responsible in the former capacity for dealing with all naval matters arising at Gibraltar and its vicinity including naval defence matters and transport duties and for the naval personnel permanently stationed there. In the latter capacity he is responsible for the administration and efficiency of the dockyard, victualling yard, armament and torpedo depots, and all questions connected with the repairs to His Majesty's ships at or visiting Gibraltar and the supplies of fuel and stores. The naval staff allowed to this officer is as follows:

1 captain, chief staff officer.
1 flag lieutenant.
1 naval secretary.
1 secretary to chief staff officer.
1 accountant officer, for Admiral's office.

The cost of the pay and allowances of the admiral and this staff is £6,300 per annum. The admiral is allowed also a coxswain and five servants whose cost per annum in pay and allowances is £1,149.

BATTLE OF JUTLAND.

Sir CHARLES CAYZER: 9.
asked the First Lord of the Admiralty whether any special steps are at present taken in the Royal Navy to commemorate the anniversary of the battle of Jutland; and
whether he will consider according some special privilege to all ranks and ratings on this day in order to mark the nation's appreciation of the services rendered by the Navy in this action?

Sir B. EYRES MONSELL: The answer to the first part of the question is in the negative. With regard to the second part, it is not the custom in the Royal Navy to celebrate the anniversary of any of our naval victories in this manner, and I do not think that it is desirable to set such a precedent.

HOME AND MEDITERRANEAN FLEETS (CAPTTAL SHIPS).

Mr. EDWARD WILLIAMS: 11.
asked the First Lord of the Admiralty the total number of Capttal ships at present in full commission in the Home and Mediterranean Fleets and the number of admirals employed in them, including chiefs of staff and similar appointments?

Sir B. EYRES MONSELL: In the Home Fleet, there are seven Capttal ships, with four admirals, namely, the commander-in-chief, his chief of staff (a rear-admiral), the rear-admiral Second Battle Squadron, and the rear-admiral commanding the Battle Cruiser Squadron. In the Mediterranean Fleet, there are five Capttal ships, with three admirals, namely, the commander-in-chief, his chief of staff (a rear-admiral), and the vice-admiral commanding the First Battle Squadron.

Mr. COCKS: Does that mean that there is one admiral for every two ships?

Sir B. EYRES MONSELL: No, Sir.

WORLD ECONOMIC CONFERENCE.

Mr. HALL-CALNE: 13.
asked the Secretary of State for the Colonies what arrangements are being made to ensure the provision of expert advice so far as the interests of the Colonies are concerned at the forthcoming World Economic Conference?

The SECRETARY of STATE for the COLONIES (Sir Philip Cunliffe-Lister): I am in continuous touch with Colonial Governments on economic questions likely to arise during the Conference; and I also hope to have the expert assistance as an adviser of Sir Edward Davson, whose help in this capacity was so valuable during the Ottawa Conference.

Oral Answers to Questions — TRADE AND COMMERCE.

PALM OIL (EXPORT DUTIES, WEST AFRICA).

Major PROCTER: 14.
asked the Secretary of State for the Colonies whether, in the interests of Lancashire trade with the Colonies, he will consider the lowering of the export duties on West African palm kernels and palm oil, in view of the proposed reduction of duty on foreign imported whale oil?

Sir P. CUNLIFFE-LISTER: The export duties on palm kernels and palm oil constitute a substantial proportion of the revenues of Nigeria and Sierra Leone. In present circumstances I could not recommend to the Colonial Governments that the export duties should be lowered, Since the money would in any case have to be found from some other source.

Major PROCTER: Is the right hon. Gentleman aware that the export tax of £3 on palm kernel oil is affecting purchasing power in West Africa, destroying the West African trade of Liverpool, and injuring the cotton trade of Lancashire, and will he not do something to prohibit the dumping of Norwegian whale oil or prevent whale oil coming into England at all?

Sir P. CUNLIFFE-LISTER: My hon. Friend is inaccurate in the rate of duty on palm kernel oil. It is not £3 but £2 in respect of Nigeria, and there is no duty in the case of Sierra Leone, but the duty on palm kernels is £l 10s. Nor is there, I think, reason to believe that this is a serious handicap. The position is, on the contrary, quite different from what it was, in that the duty used to be operative while there was no preference in this country. Now there is a preference granted in this country on both palm kernels and palm oil.

Lieut.-Colonel SANDEMAN ALLEN: Has the right hon. Gentleman considered the fact that the competition of whale oil is going to destroy the export trade owing to the amount of whale oil that is being sold?

Sir P. CUNLIFFE-LISTER: I certainly do not think so. As a matter of fact, the whale oil coming in in British ships always came in free of duty.

Sir JOHN HASLAM: Is the right hon. Gentleman aware that the import of palm
oil and kernels has decreased to a half during the last 10 years, whereas whale oil is nine times what it was 10 years ago?

Sir P. CUNLIFFE-LISTER: Yes, but unless we are to say that whale oil must never be used anywhere by anyone, there must inevitably be some measure of competition between the two.

RUSSIAN GOODS (IMPORT PROHIBITION).

Mr. BOSSOM: 27.
asked the President of the Board of Trade the terms of the rule or regulation under which Russian material, excluded under the embargo, is now being admitted into this country on the assumption that payments on account have already been made; and what steps are being taken to ensure that the intention of the embargo is not being nullified?

Lieut.-Colonel J. COLVILLE (Secretary, Overseas Trade Department): My hon. Friend is under a misapprehension if he supposes that licences are issued on the assumption that payments on account have been made. Satisfactory documentary evidence of substantial payment before the proclamation was issued is required in all cases in which a licence is applied for on this ground.

Mr. ANSTRUTHER-GRAY: What is meant by substantial payment. Does it mean that 50 per cent. payment has been made, or more?

Lieut.-Colonel COLVILLE: Considerably more.

Mr. BOSSOM: 28.
asked the President of the Board of Trade whether licences have been issued, and, if so, for what numbers and quantities, for the import of Russian sleeper-blocks; and whether, in view of the low price at which this material is imported, he is satisfied that Article 21 of the Anglo-Canadian Agreement is being observed?

Sir PERCY HURD: 30.
asked the President of the Board of Trade if, in view of the low prices at which Russian timber is being imported into this country, he will say what steps are being taken to carry out the declared intention of the Government that Article 21 of the United Kingdom-Canada Agreement shall be used to prevent goods being sold here under the market price?

Lieut.-Colonel COLVILLE: No licences have yet been issued in respect of Russian sleeper-blocks, but I have been approached in regard to an advance in respect of such sleeper-blocks made before the proclamation. The firm have been informed that no licences will be granted to them except in respect of sleeper-blocks for which they had paid in full before the proclamation and which are in effect their property. I am not in a position to state the precise quantity required for the recovery of the advance, but according to my information it will probably be about 20,000 standards. The position in relation to Article 21 of the Anglo-Canadian Agreement is under consideration.

Sir P. HURD: Has my hon. and gallant Friend any information showing the price at which these blocks are to be brought into this country; and is he aware that the Chancellor of the Exchequer stated on 1st November that Article 21 was to be used to bring about a cessation of the sale of this material at below market price?

Lieut.-Colonel COLVILLE: Yes, Sir. I have pointed out that the position in relation to Article 21 is at present under consideration, including the point which the hon. Member raises.

Sir P. HURD: 29.
asked the President of the Board of Trade if he is aware that Russian material excluded under the Russian embargo is being imported into this country after having been transhipped at same non-Russian port; and what steps are being taken to prevent this practice?

Lieut.-Colonel COLVILLE: Importers of goods of the kinds named in the proclamation from countries other than Russia are required to furnish on the relative Customs entry a declaration to the effect that the goods are not within the prohibition. In addition, goods of these kinds imported from European and certain Asiatic countries must be accompanied by consular certificates of origin. I have no reason to think that these safeguards are not effective, but if my hon. Friend has any concrete case in mind I shall be glad to receive particulars.

Sir P. HURD: May I ask my hon. and gallant Friend whether, in view of the most definite and authoritative information which is now available, his Depart-
ment will take steps to see that the embargo is not evaded?

Lieut-Colonel COLVILLE: As my answer explains, I have no reason to think that these safeguards are being evaded, but, if my hon. Friend can add anything to the information which the Board of Trade already possess, I shall be only too happy to receive it.

Sir P. HURD: Is my hon. and gallant Friend making inquiries on his own account?

Lieut.-Colonel COLVILLE: Yes, Sir. I am not informed in this matter purely by statements which are made in the Press. The Board of Trade have full information about the matter.

Sir JOSEPH LAMB: Does not my hon. and gallant Friend think that it is desirable that a limit should be placed upon the time that imports should be allowed to come in?

Lieut.-Colonel COLVILLE: In point of fact, they will settle themselves. We are dealing only with the cases where payment has been made beforehand, and in time these will work themselves out.

CANADIAN TARIFF BOARD.

Mr. GRAHAM WHITE: 33.
asked the Secretary of State for Dominion Affairs if the Canadian Tariff Board is now fully constituted; if it has heard any applications; and, if so, with what results?

The UNDER-SECRETARY of STATE for DOMINION AFFAIRS (Mr. Malcolm MacDonald): I would refer the hon. Member to the answer which my right hon. Friend gave to him in reply to a similar question on the 10th May. My right hon. Friend understands that the Canadian Tariff Board is engaged in a preliminary examination into certain questions which arise in connection with the applications at present before it.

Mr. MANDER: Does my hon. Friend consider that eight months delay is reasonable?

Mr. MacDONALD: I would refer my hon. Friend to an answer given to a supplementary question on the occasion I have mentioned.

Mr. LAWS0N: Can the hon. Gentleman say whether his right hon. Friend is giving his attention to these matters at the present moment?

SHIPPING SUBSIDIES.

Mr. KIRKWOOD (for Mr. MACLEAN): 31.
asked the President of the Board of Trade whether he is aware that the German Government is proposing to grant a subsidy of 20,000,000 marks to German shipping; whether he has considered the effect this will have upon British shipping; and whether he can state what action, if any, the Government propose to take?

The PARLIAMENTARY SECRETARY to the BOARD OF TRADE (Dr. Burgin): I have seen reports in the Press to the effect stated in the first part of the question. The question of shipping subsidies is included in the draft agenda for the World Economic Conference.

Mr. KIRKWOOD: Will the hon. Member convey to the President of the Board of Trade the information that Germany is now building a new mercantile fleet and that they are being placed in an advantageous position so far as British shipping is concerned? May I also ask what action the Government are prepared to take to see that British shipbuilding firms are not handicapped by the result of the subsidy which Germany is giving?

Dr. BURGIN: I will convey that information to my right hon. Friend.

AIR SERVICES (GROUND FACILITIES, MALAYA).

Captain PETER MACDONALD: 15.
asked the Secretary of State for the Colonies whether all necessary arrangements, with regard to landing grounds and other services, have been made in Malaya to enable the London-Australian air route to be commenced in accordance with the scheduled dates?

Sir P. CUNLIFFE-LISTER: Ground facilities for aircraft already exist in Malaya and the Governments concerned have agreed to make these available for use by Imperial Airways in connection with the proposed air service to Australia. I understand that the question whether any relatively small additional facilities will be needed is now under examination by the company.

Captain HAROLD BALFOUR: Will these facilities be available for other lines than Imperial Airways?

Sir P. CUNLIFFE-LISTER: I should like notice of that question.

NORTH CHARTERLAND INQUIRY (REPORT).

Mr. SMITHERS: 17.
asked the Secretary of State for the Colonies whether the findings of the court concerning the North Charterland Inquiry have been issued; and if he will place a copy in the Library of the House?

Sir P. CUNLIFFE-LISTER: I have received to-day the further report of the commissioner. When it is printed, I will have a copy placed in the Library.

Oral Answers to Questions — TRANSPORT.

TRAFFIC NOISES.

Lieut.-Colonel ACLAND-TROYTE: 21.
asked the Minister of Transport whether, in view of the inconvenience and annoyance caused to the public by- the use of motor vehicles, especially motor-cycles, which have inefficient silencers or to which no silencers are fitted, he will strengthen the law so as to secure the abatement of this nuisance?

The PARLIAMENTARY SECRETARY to the MINISTRY of TRANSPORT (Lieut.-Colonel Headlam): My hon. Friend does not think that the law on this subject needs strengthening. A penalty as high as £20 can be imposed for a first offence against the regulations dealing with the construction, weight or equipment of motor vehicles and the regulation with regard to silencers comes within this category.

Lieut.-Colonel ACLAND-TROYTE: Is the hon. and gallant Gentleman aware that the law is persistently broken, and will he take steps to draw the attention of local authorities to the matter in order to see that the law is enforced?

Lieut.-Colonel HEADLAM: I am not aware that the law is continually broken, and certainly it is not the duty of the Minister of Transport to see to the enforcement of the law.

Lieut.-Colonel ACLAND-TROYTE: If the hon. and gallant Gentleman is not deaf, he must be aware of it.

Lieut.-Colonel HEADLAM: I am glad to say that I am not deaf and, though I have heard the noises referred to by my hon. Friend, I think that it is possible to exaggerate the nuisance caused by them.

MOTORING OFFENCES.

Sir CHARLES OMAN: 39.
asked the Secretary of State for the Home Department whether, in view of the recent increase in cases of reckless driving on roads outside the Metropolitan area by those in charge of large commercial vehicles, he will instruct the mobile police or traffic patrols to pay special attention to these offenders?

The UNDER-SECRETARY of STATE for the HOME DEPARTMENT (Mr. Douglas Hacking): The attention of all Chief Constables has been drawn to the need for vigilant and firm action to enforce the law in cases of reckless driving, with particular reference to heavy vehicles subject to statutory speed limits, and my right hon. Friend has no reason to think that they have not given suitable instructions to their officers and particularly to traffic patrols to prevent and detect offences of that character.

Sir C. OMAN: Would the right hon. Gentleman be surprised to hear that this question was asked in consequence of several complaints from constituents, and from my own personal experiences in the Home Counties? There seemed to be no police patrols anywhere.

Mr. HACKING: Yes, Sir, but may I tell my hon. Friend that there have been many more offences dealt with in the last 12 months than in the previous 12 months.

Mr. DORAN: 41.
asked the Home Secretary the number of successful prosecutions that have been brought against motor-coach and lorry proprietors for defective rear-lights, faulty tyres, defective silencers and excessive speed, respectively?

Mr. HACKING: My right hon. Friend regrets that the information is not separately available.

HORSE-DRAWN VEHICLES, LONDON (OVERIEADING).

Captain HEILGERS: 40.
asked the Home Secretary whether he will issue instructions for the prevention of the increasing practice of ovErieading horse-drawn vehicles in the Metropolitan Police area?

Mr. HACKING: The police have standing instructions to look out for cases of this kind, but the Commissioner informs me that he has not received any indications that there has been an increase. If, however, my hon. and gallant Friend has any particular cases in mind, I shall be happy to investigate them.

Mr. SMITHERS: Was Hyperion attached to one of these vehicles?

OIL-ELECTRIC PASSENGER TRAINS.

18. Mr. CURRY (for Mr. HOLDS-WORTH): asked the Minister of Transport if his attention has been drawn to the experiments in oil-electric passenger trains by the Union Pacific Railway Company in the United States; and whether any similar experiments are being carried out in this country with a view to improving the economic position of the rail ways?

Lieut.-Colonel HEADLAM: The whole question of improvement in railway services by the adoption of oil electric passenger trains or the use of light units is being carefully studied by British railway companies. Various experiments are being made and the railway companies are keeping in touch with similar experiments in other countries.

CYCLES (REAR LIGHTS).

Mr. DORAN: 19.
asked the Minister of Transport if in view of the ineffectiveness of rear reflectors carried by pedal cyclists, he will consider introducing legislation to compel all cyclists to use a rear-light in place of the reflector?

Lieut.-Colonel HEADLAM: Parliament decided in 1927, in the Road Transport Lighting Act of that year, that in the case of pedal cycles and tricycles an efficient red reflector might be carried in place of a red rear lamp. The question will need to be reviewed when the statistics which the police are at present supplying to my Department with regard to fatal road accidents are analysed. My hon. Friend cannot give any undertaking with regard to the introduction of legislation on the subject.

Mr. CURRY: Is the hon. and gallant Member aware that the absence of lights on cycles puts an undue strain on the motor driver and, therefore, leads to less-efficiency in driving on the roads?

Lieut.-Colonel HEADLAM: I am well aware of the point to which the hon. Member alludes.

Mr. LEVY: Is it not true that most cycle accidents are caused by cyclists riding three abreast on the roads?

Lieut.-Colonel HEADLAM: We shall know more about that when we have received the report which is now being made.

INCOME TAX (CO-OPERATIVE SOCIETIES).

Mr. MABANE: 42.
asked the Chancellor of the Exchequer whether he has prepared a revised estimate of the yield of the proposed tax on co-operative societies in accordance with the terms of the new Clause proposed to be added to the Finance Bill; whether he can state what that revised estimate is; and how it compares with the original estimates submitted to the House?

The FINANCIAL SECRETARY to the TREASURY (Mr. Hore-Belisha): As explained in the footnote on page 22 of the White Paper relating to the Financial Statement the estimates origiNaily submitted were based upon the adoption of the full recommendations of the Raeburn Report. The new Clause carries out these recommendations and no alteration of the original estimates is necessary.

Mr. MANDER: Is there an estimate of the revenue that could be obtained if the services were paid out of "divi's."?

Oral Answers to Questions — COAL INDUSTRY.

AMALGAMATION SCHEMES.

Mrs. WARD: 22.
asked the Secretary for Mines if he is in a position to say how many collieries will be closed as a result of the amalgamation schemes of the Coal Mines Re-organisation Commission; and how many miners will be affected?

The SECRETARY for MINES (Mr. Ernest Brown): I cannot express any opinion as to the possible effects upon individual collieries, or upon employment, of such schemes of amalgamation. To what extent amalgamation of colliery companies may mean the closing of pits will always depend upon the policy of the
directorate of the amalgamated company after formation.

Mrs. WARD: Is my hon. Friend aware of the ill-effect this uncertainty is having in the Cannock Chase coalfield?

Mr. BROWN: My hon. Friend will realise that there is bound to be uncertainly when there is a big change impending. If she has particular cases of uncertainty and will bring them to my notice, I shall be glad to pass them on to the Chairman of the Commission.

Mr. SMITHERS: May I ask my hon. Friend whether these collieries could not be kept open if there was more elasticity in the quota arrangements?

Mrs. WARD: 23.
asked the Secretary for Mines if he is in a position to give any details of the proposals of the Coal Mines Reorganisatoin Commission for the amalgamation of collieries in Cannock Chase; and if he can state the number of collieries to be included in the scheme?

Mr. BROWN: I am informed that the Commission have not yet formulated any scheme in this district. They are at present engaged, through professional agents appointed by them for the purpose, in investigating the circumstances and prospects of the 13 companies of which the district substantially consists and I understand that there can be no question of any scheme being prepared until this investigation has been completed.

Mrs. WARD: Can my hon. Friend tell us what is to happen to the 13 collieries which are outside the scheme?

Mr. BROWN: If the hon. Lady will put down a question upon that point, I will get the information for her.

IMPORT DUTIES, CANADA.

Mr. WHITE: 34.
asked the Secretary of State for Dominion Affairs whether he is aware that the Canadian Government have imposed dumping duties on British bituminous coal; and if he has taken any action in the matter?

Mr. M. MacDONALD: Yes, Sir. The matter is under consideration, but I am not yet in a position to make any further statement.

WORKMEN'S COMPENSATION INSURANCE, LANCASHIRE.

Captain SPENCER: 38.
asked the Home Secretary if he can make any statement upon the matter of compulsory workmen's compensation insurance in the Lancashire coal industry?

Mr. HACKING: I would refer my hon. Friend to the reply given to the hon. Member for Leigh (Mr. Tinker) on the 18th instant, to which at present I have nothing to add.

Oral Answers to Questions — SCOTLAND.

COUNCIL HOUSES (TENANTS' MEANS).

Mr. KIRKWOOD: 25.
asked the Secretary of State for Scotland by what statutory authority the Department of Health are enforcing a means test for the tenants of municipal houses in Scotland; is he aware that all municipal houses have been let by local authorities in accordance with regulations which have excluded households earning more than standard incomes, varying according to district; and, as no means test has been proposed for municipal tenants in England and in view of the protests made against it in Scotland, will he now order its withdrawal?

The UNDER-SECRETARY of STATE for SCOTLAND (Mr. Skelton): With regard to the first part of the question, I think the hon. Gentleman is under a misapprehension. The Department of Health itself is not enforcing a means test but as I stated in reply to a previous question has asked local authorities to furnish lists showing the occupations of the tenants of subsidised houses in easels where the local authority has intimated that it proposes to take no steps to ascertain the means of these tenants. In reply to the second part of the question, it is not the case that all municipal houses have been let on the terms mentioned by the hon. Member. With regard to the third part it is not proposed to reverse the policy stated in my previous reply. As regards England, perhaps the hon. Gentleman will address a question to my right hon. Friend the Minister of Health.

Mr. McGOVERN: Can the hon. Gentleman inform us whether there were four Glasgow Labour Members on the committee which made the recommendation
of the means test, and that they all agreed to the application of the means test?

MILK-MARKETING SCHEME.

Mr. KIRKWOOD: 26.
asked the Secretary of State for Scotland how many farmers and consumers will be affected by the proposed Scottish milk-marketing scheme; when it is intended that the scheme should come into operation; and if any action will be taken to remedy defects in the scheme already disclosed?

The SECRETARY of STATE for SCOTLAND (Sir Godfrey Collins): The scheme applies to an area covering the whole of Scotland south of the Grampians. It is estimated that within that area there are from 15,000 to 20,000 producers of milk and that the total population of the area is slightly over 4,000,000. Following on approval of the draft of the scheme by affirmative resolution of both Houses of Parliament I made an Order bringing the scheme into force on 26th May. The regulatory provisions of the scheme are, however, suspended in accordance with the statutory provisions until a poll of the producers has been taken. It is anticipated that if the scheme is approved at the poll, it may be in full operation by 1st November. I am not aware of any defects having been disclosed in the scheme, but the Act provides machinery for the amendment of schemes if amendment is found to be necessary.

WESTERN ISLANDS (STEAMER FARES).

Mr. KIRKWOOD (for Mr. NEIL MACLEAN): 20.
asked the Minister of Transport if he is aware that the steamer fares to certain of the Clyde holiday resorts and of the Western Islands of Scotland are still 100 per cent. dearer than pre-War, and that no cheap holiday or weekend fares are granted to those places; and whether he will take steps to ensure that places accessible by steamer are treated similarly to places served by the railways, and that no hardship is caused to such places by reason of the monopoly of the means of access to them?

Lieut.-Colonel HEADLAM: No, Sir. From information furnished by companies operating services on the Clyde and to the Western Isles, I understand that the fares are not generally so much as 100 per cent. in excess of those charged before the War. My hon. Friend has no con-
trol over the fares charged by the companies operating services on the Clyde, but I am informed that they were on a very low basis before the War and are now 50 per cent., in the case of single fares, and 75 per cent. in the case of return fares, over the pre-War level. In the circumstances the companies are not prepared to put reduced fares into force on their steamers. In the case of Messrs. MacBrayne's services, the fares were readjusted as a condition of the new mails contracts made with the company in 1928. The hon. Member will realise that traffic to and from the Western Isles is not sufficiently heavy to warrant the cheap facilities which may be commercially practicable where dense traffic is available.

Mr. KIRKW00D: Is the hon. Member not aware that the Government have control over these steamers, particularly the MacBrayne steamers, as they carry the mails and are subsidised by the Government? They have not come down in the amount of their fares in keeping with the railway company, and will he not use his influence with the Government to see that the poor folk in the outer islands get the facilities which were guaranteed when this contract was given?

Lieut.-Colonel HEADLAM: I can assure the hon. Member that attention is being directed to the matter.

VICTORIA, AUSTRALIA (BRITISH SETTLERS).

Captain HEILGERS: 32.
asked the Secretary of State for Dominion Affairs whether he can now state the decision of His Majesty's Government in regard to the report of the Royal Commission on Migrant Settlers in Victoria?

Mr. M. MacDONALD: My right hon. Friend is not yet in a position to add anything to the reply which he gave on the 23rd May to the question on this subject addressed to him by the Noble Lord the Member for Bristol Central (Lord Apsley).

Captain HEILGERS: May I ask my hon. Friend whether, in view of the report of the Royal Commission that gross misrepresentations were made to the
settlers before they left London, he cannot see his way to urge the Victorian Government to implement the findings of the commission?

Mr. MacDONALD: We have no reason to suppose that the authorities in Australia are not giving very proper and careful consideration to the report.

INDIA (PHOTOGRAPH).

Mr. DREWE: 36.
asked the Secretary of State for India whether he will give the House information in regard to the recent incident which occurred at Lucknow in which a hostile body of armed natives threatened to attack British residents?

The SECRETARY of STATE for INDIA (Sir Samuel Hoare): So far as I am aware, no such incident as my hon. Friend describes has occurred. The impression that there has been such an incident originates, I believe, in a photograph illustrating an article published recently by a member of the India League Delegation which visited India last year. This photograph was actually taken on the occasion of a distribution of food and blankets to the poor during the tour of His Royal Highness the PrInce of Wales in India in 1921. Since then, it has appeared with various descriptions in varous countries. For example, it has appeared in a foreign paper as a gathering of Untouchables at a meeting in support of Mr. Gandhi's campaign for abolishing Untouchability, I believe that there is a deficiency of genuine pictures of anti-British demonstrations, just as there is also a shortage of genuine accounts of police excesses in India, and that ingenuity is resorted to in both cases.

FUEL RESEARCH BOARD (COST).

Mr. JARDINE WHYTE: 37.
asked the Lord President of the Council the total cost to the nation of the Fuel Research Board for the last financial year?

The LORD PRESIDENT of the COUNCIL (Mr. Baldwin): The net expenditure on fuel research in the last financial year, from the Vote of the Department of Scientific and Industrial Research, was £84,250. The cost of ser-
vices provided by other Departments (e.g., His Majesty's Office of Works) during the same year is not yet available, but the cost in 1931 was approximately £10,000.

Mr. GLEDHILL: Can the right hon. Gentleman say what steps have been taken to communicate the results of this research to the industries concerned?

Mr. BALDWIN: If the hon. Member will put down a question, I shall be glad to answer.

Oral Answers to Questions — UNEMPLOYMENT.

BENEFIT (WORK WITHOUT DISQUALIFICATION).

Mr. MOLSON: 44.
asked the Minister of Labour whether he can now make available for Members of this House copies of the leaflet recently published explaining the conditions under which unemployed persons may engage in certain occupations and activities without being disqualified for unemployment benefit or transitional payments?

The PARLIAMENTARY SECRETARY to the MINISTRY of LABOUR (Mr. R. S. Hudson): Yes, Sir. My right hon. Friend has arranged for copies of the leaflet (U.I.L. 40) to be available in the Vote Office for the convenience of members.

GRANITE POLISHERS, ABERDEEN.

Mr. ROBINSON: 49.
asked the Minister of Labour what is the number of skilled vertical granite polishers at present unemployed in Aberdeen; and whether he is aware that offers of employment for such men in south-west Lancashire at more than trade union wages have been declined?

Mr. HUDSON: There are 16 workmen of this grade on the register at Aberdeen. I understand that their non-employment in the vacancies to which my hon. Friend evidently refers is not connected with the question of wages nor any refusal of the men to accept these vacancies.

Mr. BURNETT: Is it not the case that there has been very few unemployed in the Aberdeen granite industry Since a tariff was put upon imported manufactured granite?

ANALYSIS.

Mr. ROBINSON: 50.
asked the Minister of Labour whether he will cause a sample analysis of unemployment to be made in each of the principal industrial areas of the country with a view to determining whether there is a standing army of unemployed; and whether he will cause the results of such an investigation to be published as a White Paper?

Mr. HUDSON: Some information on this subject, relating to February, 1931, was supplied to the Royal Commission on Unemployment Insurance and published as Part V of the Appendices to the Minutes of Evidence; it is referred to in paragraph 114 of their Final Report. A sample analysis of the contributions and benefit experience of insured claimants over a period of three years was recently made and is now being tabulated; the results should give some further information on the point raised in my hon. Friend's question. A summary will be published in due course in the Ministry of Labour Gazette.

AGED WORKERS.

Mr. SMEDLEY CROOKE: 51.
asked the Minister of Labour the number of insured men employed in industry of the ages from 60 to 65, and the number over 65, at the latest convenient date?

Mr. HUDSON: It is estimated that the number of men aged 60 to 64 insured under the Unemployment Insurance Acts is approximately 430,000, of whom about 147,000 are unemployed. As regards persons aged 65 and over it is estimated that the number of men aged 65 and over who are employed at some time during the year in industry, including agriculture, is about 260,000. The number in employment at any particular date is substantially less than this figure.

TRANSITIONAL PAYMENTS, WEST RIDING.

Mr. T. SMITH: 53.
asked the Minister of Labour the nature of the alterations that have been made recently in the conditions governing transitional payments under the means test in the area covered by the West Riding County Council, and the date of their operation?

Mr. HUDSON: I am not aware of any recent alterations.

IMPERIAL DEFENCE.

Lieut.-Colonel WINDSOR-CLIVE: 45.
asked the Prime Minister whether he has considered the recommendation of the Private Members' Economy Committee that a committee should be appointed to examine forthwith the question of imperial defence as a whole, and in particular the relations of the three Fighting Services to each other; and whether he proposes to take any action in the matter?

Mr. BALDWIN: I have considered the recommendation of the Private Members' Committee to which my hon. and gallant Friend refers, but I do not think that any useful purpose would be served by the appointment of such a Committee as hon. Members had in mind. The general questions which it was contemplated should be referred to the Committee are constantly under inquiry by the Committee of Imperial Defence.

Lieut.-Colonel WINDSOR - CLIVE: Does the right hon. Gentleman not think that such an inquiry would very likely reveal a certain amount of overlapping and duplication of the work of the Services, and that such an inquiry might lead to increased economy as well as increased efficiency?

Mr. BALDWIN: No. I should not feel certain of that.

DISARMAMENT CONFERENCE (BRITISH AIR POLICY).

Captain BALFOUR: 46
asked the Prime Minister (1) whether, in view of the willingness of the British Government delegate at the Disarmament Conference to discuss further the British reservation for the use of aircraft for police purposes in outlying areas with delegations of countries who object to our reservation, he will give an assurance that no concessions will be made by His Majesty's Government which may restrict the efficiency of action by such forces;
(2) whether, as the withdrawal or limitation of action of the air arm in Aden protectorate or the Sudan would, in present circumstances, expose the inhabitants of these areas who are under our protection to aggression from exterior forces, he will assure the House that His Majesty's Government will not agree to any such withdrawal or limitation;
(3) if he will give an assurance that His Majesty's Government will not accept any amendment of the British draft convention whereby limitation of numbers of aircraft for police purposes in any one area at any time within the maximum total number of aircraft permissible to this country will be governed by any body or decision other than the discretion of His Majesty's Government?

Mr. BALDWIN: I would refer my hon. and gallant Friend to the answer which I gave yesterday in reply to a Private Notice Question by the Leader of the Opposition. I would add that His Majesty's Government will obviously retain the right to employ such aircraft as they may be allotted under the convention in such manner and in such place as they may think fit, subject to any international regulations which may be fiNaily agreed.

Captain BALFOUR: May I ask the right hon. Gentleman if he differs from the allegation in Question 47, that the withdrawal or limitation of action of the air arm in the Aden Protectorate or the Sudan would expose the inhabitants of these areas to immediate external aggression?

Mr. BALDWIN: I do not think that I am called upon to answer that question, because my answer, if properly understood, shows that the circumstances are remote in which that hypothesis might become tenable.

HOURS OF WORK.

Mr. MANDER: 52.
asked the Minister of Labour the present position with regard to the International Labour Office proposals for a 40-hour week; and what inquiries are taking place in this country on the subject?

Mr. HUDSON: The subject of the reduction of the hours of work is on the agenda of the International Labour Conference which opens at Geneva on 8th June, 1933. My right hon. Friend has been in consultation with the National Confederation of Employers' Organisations and the General Council of the Trades Union Congress with regard to the possibility of absorbing more workers into employment whether by reduction of hours of work or otherwise. I under-
stand that both bodies have inquiries in hand with regard to the question of hours of work.

Mr. MANDER: Does my hon. Friend hope to have any information to put before the Conference when it meets on the 8th June?

Mr. HUDSON: I do not think that arises out of the question.

Mr. T. WILLIAMS: May I ask whether the Minister of Labour has reached any conclusions as a result of his conversations with the employers and employed?

Mr. HUDSON: I have stated in my reply that both these bodies are now conducting investigations into the matter and that my right hon. Friend hopes to receive their observations in due course.

CEYLON.

Mr. DAVID GRENFELL: 12.
asked the Secretary of State for the Colonies what action His Majesty's Government propose to take with regard to the memorandum submitted to him from the Board of Ministers in Ceylon with regard to the reform of the present constitution?

Sir P. CUNLIFFE-LISTER: I have not yet received any such memorandum.

UNEMPLOYMENT INSURANCE (EXPIRING ENACTMENTS) BILL.

"to continue in force for a further period the Unemployment Insurance Act, 1930, and sections one and two of the Unemployment Insurance (No. 3) Act, 1931,"presented by Sir Henry Betterton; supported by Sir Godfrey Collins, Sir Hilton Young, Mr. Hore-Belisha, and Mr. Robert Hudson; to be read a Second time upon Wednesday, 14th June, and to be printed. [Bill 113.]

PUBLIC PETITIONS.

Special Report and Second Report of the Select Committee brought up, and read;

Special Report and Report to lie upon the Table, and to be printed.

Orders of the Day — FINANCE BILL

Further considered in Committee. [Progress, 30th May.]

[Captain BOUBNE in the Chair.]

NEW CLAUSE.—(Charge of tax on mutual profits and repeal of 8 and 9 Geo. V., c. 40. S 39 (4).)

(1) In the application to any company or society of any provision or rule relating to profits or gains chargeable under Case I of Schedule D (which relates to trades) or under Rule 4 of the rules applicable to Case III of Schedule D (.which relates to the profits of certain cattle dealers and milk dealers) any reference to profits or gains shall foe deemed to include a reference to a profit or surplus arising from transactions of the company or society with its members which would be included in profits or gains for the purposes of that provision or rule if those transactions were transactions with non-members, and the profit or surplus aforesaid shall be determined for the purposes of that provision or rule on the same principles as those on which profits or gains arising from transactions with non-members would be so determined.

(2) Sub-section (4) of Section thirty-nine of the Income Tax Act, 1918 (which exempts certain registered societies from income tax under Schedules C and D), shall cease to have effect.

(3) It is hereby declared that in computing, for the purposes of any provision or rule mentioned in Sub-section (1) of this Section, any profits or gains of a company or society (which include any income which is chargeable to tax by virtue of the foregoing provisions of this Section, there are to be deducted as expenses any sums which—

(a) represent a discount, rebate, dividend, or bonus granted by the company or society to members or other persons in respect of amounts paid or payable by or to them on account of their transactions with the company or society, being transactions which are taken into account in the said computation; and
(b) are calculated by reference to the said amounts or to the magnitude of the said transactions and not by reference to the amount of any share or interest in the Capital of the company or society.

(4) A registered society whose business consists mainly in the making of investments, and the principal part of whose income is derived therefrom, shall be entitled to relief under Section thirty-three of the Income Tax Act, 1918 (which relates to relief in respect of expenses of management), in the same manner and to the same extent as if the business of the society were the business of a company.

(5) Where the profits or gains of a company or society include any income which is chargeable to tax by virtue of the provisions of Sub-section (1) or Sub-section (2) of this Section, but is not otherwise chargeable to tax, the following transitional provisions shall have effect:

(a) where the computation of profits or gains is required to be made by reference to any year or period other than the year of assessment, the computation for that year or period shall foe made in accordance with the provisions of Sub-section (1) of this section, notwithstanding that those provisions were not in force in that year or period or some part thereof;
(b) where a claim is made for a deduction in respect of the wear and tear or replacement of any machinery or plant under Rule 6 or Rule 7 of the Rules applicable to Cases I and II of Schedule D, paragraph (6) of the said Rule 6, and the said Rule 7, shall have effect as if there had been allowed, for all years of assessment prior to the year 1933–34, all such deductions for wear and tear (but not including any additional allowance under Section eighteen of the Finance Act. 1932) as would have been allowable in charging profits or gains which would have been chargeable if Sub-sections (1) and (2) of this section had been in force throughout those years; and, in computing the amount of profits or gains to be charged, no sum shall be deducted (otherwise than under the said Rule 7) in respect of the cost of the renewal or replacement of any machinery or plant exceeding the amount of such cost reduced by the total amount of all such deductions for wear and tear as would have been allowable as aforesaid;
(c) no deduction shall be carried forward from the year 1932–33 under paragraph (3) of the said Rule 6 and no loss, or portion of a loss, which was sustained before the sixth day of April, nineteen hundred and thirty-three, shall be carried forward under or by reference to Section thirty-three of the Finance Act, 1926, except so far as the deduction or loss, or portion of a loss, as the case may foe, related to transactions any profits or gains from which were chargeable with tax for the said year 1932–33 or previous years.

(6) Where any profits or income of a registered society arising in the year 1933–34 have, by virtue of the provisions of this section, ceased to foe exempt from Income Tax chargeable by deduction and the tax has not been deducted therefrom, an assessment may be made on the society under Case III of Schedule D as if the profits or income were mentioned in Rule 1 of the rules applicable to that Case and first arose in the said year.

(7) In this section the expression "company or society" means any incorporated company or society whether incorporated in the United Kingdom or elsewhere, and the expression "registered society" means a society registered under the Industrial and Provident Societies Acts, 1893 to 1928, or
under the enactments in force in Northern Ireland known as the Industrial and Provident Societies Acts (Northern Ireland), 1893 to 1929.—[Mr. Chamberlain.]

Brought up, and read the First time.

3.23 p.m.

The FINANCIAL SECRETARY to the TREASURY (Mr. Hore-Belisha): I beg to move, "That the Clause be read a Second time."
Until this moment I had thought that my right hon. Friend the Chancellor of the Exchequer would move this Clause, but it now falls upon me to explain the proposals in as concise a manner as I can. The two new Clauses on the Order Paper represent the adoption by the Government of the report of the Raeburn Committee, which was appointed to inquire, as everyone knows, into the position of co-operative societies in relation to Income Tax and to report whether any modification in that position is desirable, and, if so, what alteration of the law was required for the purpose. The recommendations of the Committee were threefold. In the first place, co-operative societies were to be charged to Income Tax in respect of trade whether with members or non-members on exactly the same principles as ordinary companies. Secondly, the "divi" was to be treated as a trading expense, and, thirdly, the statutory exemption granted by Section 39, Sub-section (4) of the Income Tax Act should be withdrawn; that is the exemption which allows societies to be free from tax under Schedules C and D. The proposals of the Government follow exactly these recommendations. In the first place, they secure that co-operative societies shall be taxable in regard to trading with their own members exactly as in regard to trading with non-members, and, in the second place, they secure that the "divi" shall be treated as a trading expense—my right hon. Friend, in compliance with his undertaking at an earlier stage, has inserted a provision in this Clause whereby it is now placed on record that the "divi" shall be treated as a trading expense—and the statutory exemption has been withdrawn.
The second Clause allows the payment of interest by co-operative societies to be made without deduction of Income Tax. That is a matter of convenience, and I do not suppose any question will arise in regard to it. In short, the proposals in the first Clause are in accord with, the
recommendations of the Committee. The reasons why the Government have followed the recommendations of the Committee have been made plain in the full discussions which we have already had, and I do not think it is necessary to reiterate them. When these Clauses are passed there will be no distinction whatever between a co-operative society and an ordinary trading company in relation to Income Tax. All sums that are distributed by way of interest on shares or loans are already subject to tax in the hands of the recipients, and that position, of course, is unaltered. With regard to the undistributed profits, the provision whereby a co-operative society is entitled to be exempt from tax under Schedules C and D and not under Schedules A and B will be removed, and all profits made from trading with the general public, whether the general public consist of the members of the society or not, will be subject to tax.
There can be no possible reason in logic for drawing any distinction between a cooperative society and any other trading company. If that anomaly did not exist to-day under the present law, no one would be proposing to come down to the House of Commons to correct it. Before my right hon." Friend the Chancellor of the Exchequer made these proposals there was much agitation, because it was feared lest the dividend should be taxed. It cannot be too emphatically stated that there is no proposal whatever to tax the dividend. The dividend is on exactly the same basis as a trading discount, and these rich co-operative corporations, with millions of Capttal, are being asked by the Government to make a small contribution of about £1,000,000 a year to the revenue. I hope I have said enough to justify this new Clause.

3.31 p.m.

Mr. LEONARD: I wish to oppose the Second Reading of this Clause. As the Financial Secretary to the Treasury has had to trace his steps over ground already covered, I offer no apology for doing the same, and perhaps introducing one or two other details. The general charge that we make with regard to this proposal is that it abrogates entirely a principle that has held sway in this country for at least 70 years. The principle of mutuality has been challenged on a number of occasions, but right
throughout that period it has held its own and has been accepted as a principle, and has received the protection of this House. What has been brought in, and what as a matter of fact the whole case of the Government impinges on, is the assertion that a legal entity has been created here of such a character as to divorce the members who come together in a co-operative society from mutual aid. I do not want to reiterate statements with regard to that aspect of the case, except to say that the legal opinions that have been given from time to time have been very emphatic and extremely strong on this point.
On the last occasion I was endeavouring to say one or two words on this matter, and I was stopped in the middle of a reference to one of the guides that the Chancellor of the Exchequer had accepted. Not only was the right hon. Gentleman leaning on the gentleman who composed the committee itself, but he brought to his aid Sir Josiah Stamp as one who had made a reservation to the Report of the Royal Commission of 1921. But Sir Josiah Stamp is not an expert on Income Tax, and we have already placed before the Members of this Committee detailed statements from representatives who have been accepted as national figures on Income Tax matters. I do not forget also that Sir Josiah Stamp was at one time a civil servant himself. I would like to have heard his opinion as a civil servant as against the opinion he puts into this reservation, when he has departed from the Civil Service and entered fields much richer than those the Civil Service offered.
The terms of the proposal now before the Committee have in their content a definite attack upon a working-class organisation. There is absolutely no doubt about that. There have been statements made from the Government side to the effect that the amount they expect to get is in their opinion not important. What has been important in the minds of the Government is that they had to placate the howls that were being put up from time to time by vested interests outside, and I think that the money they expect to get is negligible in comparison with that task. I desire to meet any points that the Government have put forward. We have been challenged from the Government Benches
to say how the legislation now contemplated is in any respects penal. I have tried from time to time to get a formula that would express my opinion on that matter; and I regret to say that I cannot get one better than the Minority Report of the Royal Commission to which I have referred. I here put forward this expression of opinion against that of Sir Josiah Stamp, as equalling it in importance if not transcending it, because the signatories to the Report, in addition to Mr. C. W. Bowerman and the late Mr. William Graham, Professor Pigou, Mr. William Brace and Mr. H. J. May, included Sir Warren Fisher and Sir E. Nott-Bower, both the latter ex-Chairmen of the Board of Inland Revenue. Here is their statement. I am reading from the Minority Report. They stated that the imposition of Income Tax upon the undistributed portion of the mutual surpluses of co-operative societies
implies that the question whether or not the receipts of a co-operative society constitute a profit depends not on the origin of those receipts but on the use to which they are put. This test is not employed as regards any other class of receipts, and we cannot agree that it can properly be allied with regard to this particular class of receipts. We conclude therefore, in agreement with the Committee of 1905, that no part of the receipts of a co-operative society which arise from transaction with its own members, whether they are distributed in dividends on purchases, or placed to reserve, or disposed of in other ways, are properly assessable to income tax.
I put that before the Chancellor of the Exchequer, as evidence at least of some weight, to show that this is in fact penal legislation. I would like the Government to give an indication where the Foreign Secretary is on this matter, for he has made a most emphatic pronouncement on it. He said:
It is clear that the whole of the balance is nothing more than money provided by the members in excess of what, as it turns out, was actually required for the purchase of the goods and the expenses of such purchase; and there is in principle no difference whatever between that part of the balance which is handed back to the members as being not required and those parts which with their consent are used for purposes which are incidental to the operations of the Society.
I would perhaps have been inclined also to refer to the Secretary of State for the Dominions, were it not for the fact that I have an outstanding illustration of this matter in the constituency that the
right hon. Gentleman represents. Here we find the Derby Co-operative Society which pays in Income Tax under Schedules A and B the sum of over £4,000 per annum on the conventional income of upwards of £19,000 per annum arising out of the ownership of property and farming. The interest on members' shares, loans and deposits amounts to over £61,000 per annum, which is regarded as real income for taxation purposes. This tax of £4,000 represents at least 1s. 4d. on each £ of interest received by the members and depositors irrespective of their own liability as people receiving it. In other words, there is a taxable income amounting to £80,000 per annum which is equal to a taxable profit on each £ of its turnover of 4 per cent., and that 4 per cent., it is suggested, is equal to any trading company's profits assessed for Income Tax. That is one of the details to be borne in mind in considering this matter.
Viewing this question from the national aspect and not from the aspect of any particular society this is the position as we see it. We see that the cooperative societies are being asked to pay, in addition to the £600,000 which they already pay, a sum of £1,200,000 making a total of £1,800,000. To that figure has to be added the taxation on the £6,500,000 interest paid to members, which will be recognised as taxable income in the possession of those members, and will be taxed to the extent to which those members are individually liable to Income Tax. The position at present is that tax is paid on Schedules A and B which is equal to an average rate of 1s. 10d. in the £ on the interest paid to members—that is the £6,000,000 odd to which I have referred. But if we take the Inland Revenue figures prepared for the committee of inquiry it is not £6,000,000 but £4,800,000 and in that case the tax paid equals 2s. 3½d. in the £.
From the report of the Inland Revenue in January last we find that the average rate of tax paid by other taxpayers in 1930–31 worked out at 1s. 11¾d. in the £ on actual income. In comparison with that, the co-operative societies, on the figures I have quoted, show a payment of 2s. 3½d. in the £. We are dealing here with actual income because it is to actual income that this proposal is related.
BEarlng in mind these figures we find that if the Government act according to the desire that is at present being expressed, the co-operative societies will be paying a tax which works out at an average rate, on the real income received by members and loan-holders, of over 5s. in the £, a tax which is out of all proportion to their liability. In addition, this would imply that the taxable income of the co-operative societies is over £15,000,000 and that is not a statement which we are prepared to accept. Because of these facts I oppose the Second Reading of the proposed new Clause.

3.44 p.m.

Mr. MABANE: I desire to refer to a matter which I expected the hon. Member for St. Rollox (Mr. Leonard) to mention. He has not remarked on the fact that the Clause now presented to the Committee, differs from the Clause origiNaily submitted by the Chancellor of the Exchequer. It will be observed that there is in the Clause now submitted a Sub-section (3) which did not appear in the original Clause—that is the Clause which origiNaily appeared on the Order Paper. The Clause which origiNaily appeared was withdrawn, and the Clause which the Committee are now considering was substituted. It appears to me that Sub-section (3) of the new Clause now before us revolutionises the effect of this tax. As I say, the hon. Member for St. Rollox made no reference to it but I would ask the Chancellor of the Exchequer to explain exactly what is the significance of this Sub-section. It may be that the interpretation which I put upon it is wrong, but it would appear to make the tax null and void. In effect, I think Sub-section (3) gives to those who are opposed to the taxation of the cooperative societies all they want. There will be, so far as I can see, no tax at all.
I asked a question earlier as to whether any revised estimate had been made in consequence of this new Subsection. I was told that no such estimate had been submitted. The point is that in the earlier Debate the Labour party asked for an assurance from the Chancellor that dividends should not be made liable to tax. It is well known that the co-operative societies would like to avoid the tax altogether by placing surplus moneys, not to reserve but to what might be called a dividend equalisation account,
and there is an Amendment in the names of some hon. Members of the Labour party to that effect. Clearly, if it were possible to place any surplus to a dividend equalisation account instead of to reserve, and if that dividend equalisation account were exempt from tax, there would be no tax collectable at all because there would be no reserve. It would appear therefore that the effect of Subsection (3) would be to give the Labour party practically what they want in that respect. The Sub-section clearly says that in calculating any profits
there are to be deducted as expenses any sum which
(a) represent a discount, rebate, dividend or bonus granted by the company or society to members, etc."
Now that is not quite what the Labour party wanted. They wanted a provision that would enable a society to set its surplus aside to a dividend equalisation account without granting that surplus specifically to particular members. But the effect of this Sub-section is to allow them to deduct from the profits any sums which represent dividends "granted" by the society to members. The word about which I want an explanation is the word "grant." If the Chancellor of the Exchequer intends that this shall represent moneys paid out, I cannot see why the words "paid out" are not used. It would be clear if the Clause read:
there are to be deducted as expenses any sums which represent dividend paid out by the society to members, etc.
It would also be clear if instead of the words "paid out" the words suggested by the Labour party were used:
there are to be deducted as expenses any sums which represent dividends set aside, etc.
But, "granted" is a peculiar word, and I want to know whether the effect of Sub-section (3) of the new Clause is that a co-operative society, in future, if this becomes law, may at the end of the year, when it realises its surplus, grant that surplus to its members but not pay it out to them. If the society were able to grant the surplus to its members but not pay it out, it would have all it wanted. It would be able to set the money aside as an effective reserve but it would merely be a case of a dividend granted, not of dividend paid out, and, if that were so, clearly there would be no tax. I am particularly interested in this
because I have down an Amendment which would have the same effect as the effect which I suppose this Sub-section to have. I believe there is no sort of argument for taxing mutual trading and that there can be no profit in mutual trading. I am concerned, as I made plain the other night, that co-operative societies should be required to engage solely in mutual trading. If they are required to engage solely in mutual trading, there is no reason to tax them, and in that way the co-operative societies would get all they want, and those who desire to see the co-operative societies confined in proper limits would also get all they want. Therefore, I ask the Chancellor of the Exchequer to explain the meaning of this new Sub-section and particularly the effect of the word "granted." Will societies in future be able to grant any surpluses they have to their individual members but keep the money in their own pockets, thus establishing an effective reserve and avoiding all tax?

3.50 p.m.

Sir ADRIAN BAILLIE: I am one of those who agree with the hon. Member for Huddersfield (Mr. Mabane), who has just sat down, that there can be no ground at present for taxing co-operative societies in so far as they restrict themselves to mutual trading. This question of the taxation of the undistributed surpluses or profits of these societies may possibly be of minor importance to the Treasury, but, looking up and down the country as a whole, I think the matter requires to be reviewed seriously, because it will undoubtedly have repercussions to a far-reaching degree. Opinion in this House with regard to this taxation may not be very evenly divided, but I protest that, on looking at the country as a whole, opinion is much more evenly divided. You have, for a start, your 6,250,000 co-operators, who roundly assert that they are already, if anything, overtaxed; and you have, on the other side, the private traders and those who represent their cause, who say that the co-operative societies are in a privileged position.
The co-operators inveigh against the vested interests of private enterprise, that private enterprise which at other times they affect to despise because it is uncoordinated and, therefore, in-
efficient, and is, in a word, synonymous with cut-throat competition; and the co-operators state that the vested interests of private enterprise are pitted against their 6,250,000 poor co-operators, whose Capttal assets, combined, cannot fall far short of £300,000,000. Again, from statements which have been made by the responsible leaders of the movement, we learn that the movement is not necessarily destined merely to finance the cooperative trading interests in this country, but that it has a much wider significance than that, and is intended to be a growing international movement, a world commonwealth built up on the ruins of Capttalism. It seems to me that it is just this red flag which drapes the whole movement which has so far bedevilled a satisfactory solution of the problem, because problem there certainly is; and, as between those who represent the fullest demands of the Co-operative Movement and those who defend the private trader, I think that right is not entirely on one side but that, as is so often the case, the truth lies half-way between.
It occurs to me that that was also probably in the mind of the Chancellor of the Exchequer when, like King Solomon, he decided, in default of an agreement with the Co-operative Movement, to cut the baby in two, and thus to get out of the difficulty; but it occurred to me at that time that, when he decided in any case to impose a tax of £750,000 on the movement, willy nilly, as these negotiations were still being transacted, that very decision might have gone far to prejudice a satisfactory solution.
Now, of course, the Chancellor of the Exchequer has adopted the recommendations of the Raeburn Committee in toto, and I want to say on this occasion that I am not prepared to accept those recommendations as sound or equitable, and for the same reason I am not in a position to support the legislation, based upon those recommendations, which is now proposed. I feel that the legislation which is under discussion to-day is unsatisfactory; at least, it is slipshod, as it was bound to be when you consider that it was based upon the recommendations of that Raeburn Committee. I can only say that either their terms of reference were too limited or else they did not set about their business with
that thoroughness and application which that business deserved. I feel that this proposed legislation can please nobody. It certainly was not to the liking of the Chancellor of the Exchequer, or he would not have tried to find another solution by private agreement; it is certainly not to the liking of the Co-operative Movement; and, if I might follow along the lines of the hon. Member who has just sat down, it may very well be not to the liking of the private traders either. So far as I can see, it will be very easy for the co-operative societies so to handle their surpluses as to be able in effect to reduce the prices of the goods which they retail, and thereby this legislation, far from protecting the private trader, is in point of fact a very real menace to him. For those reasons, if I am not prepared to vote against the Government at this stage, it is only because I have, with some hon. Friends of mine, put down an Amendment which we believe will go far to meet the rightful interests of the co-operative societies and prove a real protection to the interests of the private trader.

3.57 p.m.

Mr. MALLALIEU: There is usually some simple principle underlying even the most complicated matters of taxation and finance. There is a perfectly simple principle underlying this proposal to tax co-operative surpluses, and for the violation of that principle I have not yet heard any justification from the Chancellor of the Exchequer or those who support the proposal. It is because of that violation that I find myself quite unable to support the Chancellor of the Exchequer in making this proposal. It is the simple principle that when a co-operative member buys any article from hit store, he is merely using the income which the tax collector has left him; that is to say, his net taxed income. It happens to be the system of the co-operative society that the member is charged rather more for his article than that article costs the society, and the society puts on one side so much as represents the difference between the price of the article to the society and the price charged to the member. If I may put it in a somewhat different way, every co-operator when he makes his purchase 1s really laying up for himself what may be described as treasure in the co-operative heaven, because he is
saving, and he proposes to save, in a large number of tiny savings rather than in one big saving.
The co-operative societies use that accumulation of surpluses either for dividend or for reserve. How is it that the Government are not going to tax the dividend, yet are going to tax the reserve, when both come from an identical source? It seems to me that the Chancellor of the Exchequer has really given away the propriety of his scheme by not taxing dividends. He is rightly not taxing them, in my opinion, but he also, for exactly the same reasons as would prevent him taxing dividends, should refrain from taxing reserves. The source of the two moneys is identical, and the salve which the Government have put out by way of justification for not taxing the dividend, that it is in the nature of a trade discount or trade expense, is just the sort of salve which I should expect a Government to put about to explain away something of which perhaps they are a little ashamed and for which they have motives which they do not wish to parade in public.
Lastly, I would like to add my voice to that of the hon. Member who has just sat down. How can this proposal benefit the private trader? The co-operative societies can and probably will increase their dividends, and thereby cause far greater harm to the private traders than is already caused by their more efficient competition. I think that this tax is unwise, in that it is a means of bringing within the purview of the Income Tax collector income which is really below the Income Tax level. It will give to thousands of persons a just feeling of grievance in that they ought not to be taxed unless they have an income over a certain level. Further, it is an insignificant thing to take rather more than a million of money from an organisation or series of organisations which have a turnover, I believe, of £300,000,000. How can this assist the private trader? And yet how plain it is that those who are to suffer the tax must feel a real sense of grievance, even although the amount involved is not great. For these reasons, I find it quite impossible to support the Chancellor of the Exchequer and his proposal, and I hope that the Committee will come to a similar view.

4.2 p.m.

Mr. KIRKWOOD: We on this side of the Committee consider that the Chancellor of the Exchequer, in bringing in this new Clause, has demonstrated the power of the co-operative movement in this country, and the powerful Tory party behind him never dreamt that the cooperative movement would be in a position to oppose the present Chancellor of the Exchequer. This Clause is supposed to be a sort of concession, a sort of go-between, but it does not fill the bill. The two last speakers demonstrated beyond any shadow of doubt that the Chancellor of the Exchequer, speaking on behalf of the Government, were out directly to attack the co-operative movement. They intended to weaken and to attack its financial resources, largely because private enterprise on the distributive side, at any rate as regards the necessities of life, just like in the building of houses, has miserably failed. The cooperative movement is the one part of the system in which the working classes themselves are organised, such as we on these benches have propounded for the last 40 years as the only way out, and that is Socialism. Private enterprise finished with the War. It could not build houses, and the Government had to intervene and empower the municipalities to build houses, because the people required them. It did not pay private enterprise to build, and, because of that, no houses were being built. Private traders do not supply goods because folk require them. They supply them if there is a profit in them, and, unless they are going to make a profit, even out of human lives, they will have nothing to do with it.
The Co-operative Movement has demonstrated its success beyond a shadow of a doubt. I am the embodiment of the Co-operative Movement. I am a co-operator born and bred, a product of the Co-operative Movement, and I compare favourably with the best man in this House, mentally or physically. The Cooperative Movement set about to fill a want in this country, which was to supply folk with goods as near cost price as possible. It has developed along humane lines—along the lines of peace. Co-operation is the embodiment of peace —peace with one another, and, as a result of that, it has built up the most powerful
distributive concern, practically, in the world—at any rate, the most powerful distributive concern in Britain, and the only successful one. It has built up this powerful concern under most difficult circumstances, while private enterprise has been going to rack and ruin on all hands, in every kind of industry. Even your great railway magnates, who are so well represented in this House, have to come to this House for assistance for the railways. I have appealed here to-day on behalf not only of shipbuilding operatives but the owners of the shipyards as against the Germans.
What is the coal industry of this country? A standing disgrace to those who control it. They have reduced the coal miner to the level of the lowest paid in Britain. The lowest standard of life any section of the working class has is given to the coal miner as the result of all your boasted private enterprise. What has it done for Britain? What is the state of the mining villages to-day? What is the state of the great shipbuilding centres to-day? A heap of ruins. Your shipyards are graveyards. Sail down the River Clyde, as I have asked the Secretary of State for Scotland to sail with me from Broomielaw to his own constituency of Greenock, and you will see a state of things that would stagger any sensible man who has the welfare of his country at heart. Shipyard after shipyard, and not a ship being built— all under private enterprise. I do not wish to speak too long on this subject because we have Amendments down, but I could go on long enough to smash your private enterprise. It is quite true that Members of this House, as a result of private enterprise, are well fed and well clothed, but what about the workers of this country who have produced the wealth? Are they being treated humanely? No. They are not being treated as the working class of this country ought to be treated.
Private enterprise has not a foot to stand upon. It is because of private enterprise that we are faced with war, because of the enmity of one country towards another, one country wanting the markets of the world and competing against each other, instead of being, as they should be in 1933, big enough to extend the right hand of fellowship not
only to our own individuals in this country hut to the nations of the world. That is what the Co-operative Movement is doing natioNaily, and this House ought to take a leaf out of the book of that movement, and extend the right hand of fellowship to the nations of the earth, instead of trying, as they are at the moment, to throttle the activities of this great movement which has all the embodiments of peace in it. I hope that the Committee will think twice before they reject the Amendment of the Labour party, because in turning it down they are turning down all that they have preached within the bounds of Christianity.

4.11 p.m.

Mr. SPENS: I intervene in this Debate with some diffidence, but I do so chiefly because in the course of the discussion we have had in this House it seems to me that there is in the minis of many hon. Members a very exaggerated, if not a quite untrue view of what is called the principle of mutuality. On many sides we have heard that the great sin of this policy of the Government is that they are attacking some sacrosanct principle of mutuality, and it is that doctorine on which I wish to say a few words. First of all, as has been pointed out by other hon. Members, it is, of course, quite untrue to say that there is any principle under which mutual associations as such are entitled to be free from paying Income Tax. If there were such a principle, neither the societies registered under the Industrial and Provident Societies Act nor the very many other societies registered under other Acts, or not registered at all, or not incorporated, would pay any Income Tax at all. But, as we well know, all those societies, mutual and otherwise which are registered under the Industrial and Provident Societies Act, pay their Income Tax, and always have paid it, under Schedules A and B: and, let me point out, that the property on which they pay that Income Tax under Schedules A and B, in fact, represents the accumulation of reserves which have come about by the saving of money contributed by members and by the operations of those societies, whereas other mutual associations which are not registered under the Industrial and Provident Societies Act not only pay their Income Tax under Schedules A and B, but they
also pay their Income Tax, and always have paid it, under Schedule 0 in respect of such investments, and are caught by that Schedule and also under Schedule D for such investments as are brought within that Schedule. And, what is much more important and more to our purpose in this Debate, they pay their tax under Schedule D in respect of trading operations whether it be with members or with non-members.
If I might instance a very recent case, I would like to remind the Committee that in 1926 an absolutely mutual body was incorporated, not under the Industrial and Provident Societies Act, and, therefore, not entitled to the special privilege to which bodies incorporated under that Act are entitled, but incorporated under the Companies Act. It was formed for the purpose of giving facilities to members in the way of marketing and giving them rooms and so forth in which to do their business. I refer to the Liverpool Corn Exchange case. It was held tha-t in all their transactions with their members they were liable to pay Income Tax on the profits arising from those transactions, although the transactions were merely giving the members facilities for doing their business, such as affording them rooms in which they should hold meetings, and so forth, for which the members paid. The test in these cases under the law is not whether a body is a mutual body and doing transactions with a member or a non-member; the true test is whether the transactions which they are in fact doing—trading and business transactions—give rise to profits which are caught by the appropriate words in Schedule D.
I should like to emphasise very strongly, therefore, that, so far from this new Clause starting by being a penal provision, the first thing that it does, by repealing the special privileges given to societies registered under the Industrial and Provident Societies Act, is to put those societies on an equality before the law with all other mutual societies that are not registered under that Act. It is a gross exaggeration to suggest that in that way this legislation is in any respect penal. If you consider the position of the persons who are interested in other mutual associations registered under the Companies Act or not registered at all, and if you consider the small shareholder
in the private company, you will see that this legislation for the first time puts on an equality before the law these societies which, by a pure accident as far as I can find, happened to escape from tax under Schedules C and D by a Clause that was slipped into the Act of 1876 or thereabouts without discussion.
May I say a word about taxing the dividends. I suggest that it is right not to tax the dividends because these particular societies get their trade by paying dividends to members—and other people sometimes—in exactly the same way as the big tobacco companies and others go in for the coupon system. They are allowed to deduct the expenditure on that type of advertising for obtaining customers as a trade expense. The Government are going to allow the societies, quite rightly, to deduct the dividends paid to their members as a trade expense. My only doubt is as to the wisdom of putting in express words exempting a trade expense of one particular type of trading in an Act of Parliament, for it introduces a new principle. So far in the Income Tax Acts the only deductions which have expressly appeared have been deductions applicable to whole classes of business. I can foresee the tobacco companies and others going to the Chancellor, and saying: "We want put into an Act of Parliament express words exempting our advertising expenses from taxation." Up to date it has been left to the practice of the Revenue Commissioners to decide in the case of each trade what is the proper trade expense to allow. I should have liked to see the Chancellor leave this question to the practice of the Revenue Commissioners as to how much and to what extent dividend can be properly deducted as a trade expense. The Chancellor has thought otherwise, however; it has been put into the Bill and to that extent it is an innovation.
It has been suggested that this is penal legislation, and an attack on certain bodies doing a great social service. One hon. Member went so far as to suggest that it is a great political mistake on the part of the Government. I venture to suggest to the Committee exactly the opposite. What is the Chancellor taxing these societies for? For the purpose of balancing his Budget. Why has he to raise so much money at the present moment? Because we all know that this
country has a millstone round its neck in the maintenance of the unemployed. One would have thought that these rich societies, when they realised what the money was required for, would have met the Chancellor of the Exchequer generously instead of fighting, as they are going to fight here and elsewhere, against paying this small sum to the Exchequer towards the maintenance of the unemployed and other social services. I beg the Chancellor to press this new Clause through without accepting any Amendments.

4.22 p.m.

Mr. COVE: The whole Committee will wish me to voice their pleasure at the speech to which we have just listened, and to congratulate the hon. Member on his ability and competence, and his knowledge of the case that he has put forward. I am sure that the Chancellor of the Exchequer, having regard to the course that the Debate has taken, will be particularly well pleased with the speech, because the right hon. Gentleman has had very cold comfort from the Debate so far. He and his able assistant have heard from both the Liberal party and members of his own party the great feeling of disturbance that is in the minds of hon. Members with regard to this tax. Undoubtedly the tax is unpopular with the Majority of Members. [HON. MEMBERS: "No!"] Shall I say then, that there is evidence in the Debate of a great fear of a political nature, and, indeed, a great fear as to whether we are doing justice to the great co-operative movement? I am very much disturbed, first because of the actual proposals which we on this side feel are a penalisation of the co-operative movement, and, as such, we oppose them. There is something else that we fear. It was brought before our minds by the speech of the Chancellor of the Exchequer and the Parliamentary Secretary. It is that we have it clearly stated for the first time in the history of this country that the Government are now looking upon co-operative societies as ordinary business concerns. That means that there is not only an injustice in the proposals, but also a menace in the future for the co-operative societies. Therefore, we oppose the proposals, not merely for what they contain, but because they embody a policy which
will increasingly penalise the co-operative moment.
I do not pretend to be able to deal with this subject from the point of view of a lawyer, but I am very much perplexed when hon. Members say that there is no difference between the cooperative societies and ordinary business concerns. I have been at some pains to study the evidence given before the Rae-burn Committee, and the more I studied it, even the evidence of the Income Taxpayers Society, the clearer it was to me that there are very vital and distinct differences between ordinary businesses and co-operative societies. Let us take one or two of them. In the ordinary business the voting power depends upon the amount of Capttal invested. The power of controlling an ordinary business depends upon the Capttal that one has in it. The power of directing the business comes directly out of the wealth one has in it. It is clear that that comes out of the ownership of individual private property. No such conditions obtain in the co-operative movement. The voting power to control the policy of that movement does not depend upon the Capttal that is invested by an individual. The co-operative societies lay down as a hard and fast rule the principle of one man one vote. It does not matter if a member has £200 or only £l in a co-operative society. The £l share carries as much power of control in deciding the policy inside the movement as a £200 share.
It is perfectly clear that the whole basis of control between the two is entirely different. One is based on Capttal and the other is based on the simple fact of membership. That is the big vital difference between ordinary business and co-operative societies. Again, in an ordinary business concern there is a limited number of shares. In the co-operative movement the shareholders cannot be limited. Everybody can come along and take up shares, but that is not so in an ordinary business. It is fair to deduce from that fact again that the main basis of the co-operative movement is not shareholding; the fact of shareholding is only incidental. It is only an incidental necessity under the existing Capttalist system of society. It is not the essential characteristic of the co-operative movement that people should own shares. The essential characteristic of the movement is that it should
be a body of people mutually engaged in economical trade; that is to say, a body of people not engaged primarily in seeking an income from invested money, but engaged in trading together in order to help one another to get goods at a lower price than they would otherwise be able to get them.
In short, the co-operative society is not an investment body. One looks at an ordinary business from the point of view of an investment, but from the point of view of the members of the co-operative society that entirely recedes into the background and gives place to mutual trading. I do not think, therefore, that there can be any comparison between ordinary business and the co-operative movement. The income that comes to shareholders is the surplus that comes out of the employment of Capttal, and, as I said before, is directly related to the amount of money that one has as Capttal in any concern. When we come to the co-operative movement, what happens there? The surplus that comes out of the trading and the earnings are the earnings of a mutual economy that redounds to all the members.
I say deliberately, and I am sorry to have to say it, that the Debate this afternoon, and the Debate we had the other evening, and a study of the memoranda presented—much of it writen, evidently, by bitter enemies of the cooperative movement—show that this taxation has no basis in equity but has as its main motive the penalising of the co-operative movement. The Chancellor of the Exchequer said that in equity he could not see any difference between co-operative societies and other concerns. I know that "equity" is a vague word, difficult to define. I have looked it up in the dictionary, and I find that equity means "moral justice." Where is the moral justice in this taxation—the taxing of hundreds of thousands, even millions, of poor people whose method of thrift lies in and through the Co-operative movement? There is no moral justice in this. There is only a vicious penalising of the co-operative movement. The dictionary says, further, that equity has regard not to the form of things but to the substance. Look at the substance of the co-operative movement. Millions of poor people trading together. What happens?
Take the case of my own home. Goods are bought, and at the end of the term my wife looks up the dockets which have been given and finds that so much has been spent with the co-operative society. It is not a question of how much has been invested in the co-operative society, but how much money has been spent on those goods. Then she says, "How much am I going to have back" —that is the dividends— "as a result of being a member of this trading concern, as a result of being a purchaser within this mutual society?" I want to emphasize the point that the money returned in dividends is our money that we have spent in that society, our money that we spent as purchasers. If we have any money invested in shares the income on those shares comes not as a fluctuating market rate of interest but as a limited and definite rate of interest. It has been said over and over again, and I want to repeat it now, that the income from any investments in shares which we as a family may have is already subject to the Income Tax law. There is no escape from it if the level of the general income is such as to bring it within the Income Tax scale. Interest from shares is subject to taxation, but the income from dividend is not on the same plane at all. It is not a profit, it is not something that comes out of the investment of Capttal. It is a surplus derived completely and entirely, or, rather, if you like, in the main, from the economical trading of a group of people who are together buying goods. If those are not clear lines of difference between ordinary business and a co-operative society, I would like to know what are clear lines.

Mr. MABANE: May I ask the hon. Member whether, when his wife receives back the "divi," she receives the whole of the surplus, or receives only a part?

Mr. COVE: She receives a part.

Mr. MABANE: Then does not that destroy mutual trading? Ought she not to receive the whole of the surplus?

HON. MEMBERS: No!

Mr. COVE: No. I am glad the hon. Member has raised that point. I was coming to it. My first reply is this, that it is exactly the same money which gives my dividend as is placed to reserve. But I am going a step further. The argu-
ment from the Government side is "we are not touching dividends." No, those are still sacred, those are still covered by the principle of mutuality. [Interruption.] Never mind the reason, they are not touched. The Chancellor of the Exchequer will agree that the "divis" are not to be touched.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain): I do not mind so long as the hon. Member repeats what I did say, but I do mind if he says something altogether different.

Mr. COVE: We will try to agree. The dividends will not be touched, the reserves will be touched. I say it is a more iniquitous thing if it can. be, and certainly a more imprudent thing, to tax reserves than to tax distributive dividends, because in the reserves—[Laughter.] Why should you tax business prudence? [HON. MEMBERS: "Ah !"] I am glad I have raised some interest. The consciences of hon. Members are very uneasy. As I see it, the position is this. A society says "We have a certain sum, say £10,000. We will take £6,000 to distribute in dividends directly to the members, and take £4,000 and put it to reserve." The money, mark you, comes out of the same pool of money. The society puts that £4,000 by in order to meet a rainy day, in order to meet difficulties, in order, if I may put it that way, to run the co-operative society on sound business lines. You are taxing that part of the surplus which will allow co-operative societies to run on sound business lines. Hon. Members opposite talk as though the principle of mutuality excluded the principle of sound business, but the two are not exclusive. You can have both the principle of mutuality and the principle of sound business embodied in the running of a co-operative society. I do not want to be unfair to the hon. Member for Huddersfield (Mr. Mabane), but I was wondering this afternoon while he was speaking whether he had altered his mind Since he registered his vote the other night. I was wondering—I say it without offence—whether he was seeking some escape.

Mr. MABANE: Not in the least. My position is now as it was before. I want to make the societies trading mutual and not to tax them. I prefer that to taxing
them and allowing them to go on trading in a manner which is not mutual.
Mr. COVE: I hope the hon. Member is not going to ride off on the less than 2 per cent. of trade with people outside the co-operative society. I hope he is not going to salve his conscience by this 2 per cent. non-member trade. I hope he is going to support us. He seemed to be doubtful whether the Clause before us was exactly the same thing as had been foreshadowed. I have read it, and to my lay mind it is exactly the same thing as we were discussing the other night. I have taken some legal advice on the point which was available to me, and I understand that is about right. The Clause which we are now reading for a Second time provides for the taxation of the reserves of co-operative societies, and we say definitely that it is an injustice, put up by people who not only have political antipathy to the Co-operative Movement, but who also want to destroy the trading of the Co-operative Movement. In these proposals the Government are lending the fullest aid they possibly can to the revival of the small trader at the expense of co-operative trading, with all that it means in cheaper food, in thrift, in aid to educational institutions and to hospitals. Indeed, the Government,. in supporting private traders, are prepared to damage a great social and economic trading movement which has done much for the working classes of this country.

4.42 p.m.

Mr. JAMES REID: I venture to think that in considering a question of this sort heat and rhetoric are probably the worst enemies of the co-operative societies. There are many Members of this House who not only want to be fair to co-operative societies but definitely favour many of the views which they put forward, but who, on the other hand, are rather frightened from supporting them by the vehemence of their professed friends. It seems to me that this is a case where one could go a good long way in supporting the views of the co-operative societies. The way I look at the question is this. This Clause is entirely devoted to the taxation of reserves, and what cooperative societies are going to do with those reserves once they have been put by makes all the difference in the world.
If the co-operative societies had used those reserves for proper reserve purposes, if they kept them as liquid funds, as reserves ought to be kept, either for paying out shareholders when they require their shares to be repaid, or for equalising dividends, or for some other purpose for which reserves are appropriate, I am quite certain that this agitation would never have started, and there would have been no question of taxation at all.
The whole case for the taxation of cooperative societies arises, I think, from this, that many societies, not by any means all of them, use reserves built up out of untaxed money for the purpose of competing with the private trader. They use reserves for the purpose of buying new businesses or extending existing businesses. I venture to think it would not be impossible to reframe these proposals in such a way as to allow co-operative societies to put money to reserves so long as they use those reserves for proper reserve purposes, but if they use that money for trading competition with private traders then it ought to bear a tax just as the private traders' money is taxed.
I venture to submit to the Government that on broad lines this proposal goes too far. It not only renders liable to tax money which is not true reserve money at all, which is money built up for fighting purposes, fighting against the private trader, but it also renders liable to tax money which it is right and proper that co-operative societies should put by and hold as liquid reserves. I ask the Chancellor of the Exchequer whether it is not possible to grant some concession to societies which treat their reserves as reserves ought to be treated. [Laughter.] Hon. Members opposite laugh. I happen to know that co-operative societies in my area use their reserves for proper reserve purposes, and that certain other co-operative societies do not. The difference arises in this way: In the North, co-operative societies are supported more widely than they are in some other parts of the country, and they are able to get plenty of fresh Capttal without having to build up a fund out of reserves. They can get any amount of Capttal that they want; in fact, they get an embarrassing amount that they cannot use. Therefore, their reserves are
proper reserves. When a society is in that position, the money that it puts to reserve ought not to be taxed. On the other hand, there are societies which cannot get new Capttal, but which choose to build up a fund out of untaxed profits. It is quite proper that those profits ought to bear a tax, just as the private trader pays a tax when he is able to build up the Capttal of his business in a similar way. I ask the Chancellor of the Exchequer whether he can reconsider the framework of this Clause on the lines which I have suggested. [HON. MEM-BEES: "Hear, hear"] I am quite certain that hon. Members who cheer would not be a bit pleased with that.

Mr. COVE: Think of the discontent.

Mr. REID: What hon. Members want is to stir up discontent, whereas what I and other hon. Members on this side of the House want is to allay discontent. If the Chancellor will grant a concession which would be reasonable, on the lines that I have suggested, such discontent as there is—and it is considerable—will be allayed. It would not satisfy the professional agitator.

Mr. KIRKWOOD: You are a professional lawyer.

Mr. REID: If the hon. Gentleman will allow me to continue, I will say that I do not class hon. Gentlemen of the Opposition in that category. There are a number of professional agitators about the country just now, and they are making Capttal out of this situation. I ask hon. Members opposite whether there is not still time to co-operate, with a view to getting a solution which will be fair to everybody. That appeal cannot fall on deaf ears. I am sure that the Chancellor of the Exchequer is willing, as he was willing, to reach a reasonable solution. Whether that can be done by agreement or not, some concession from the very stringent framework of the present Clause would do a very great deal of good in the country, and would sacrifice very little revenue. I suggest that something might be thought out on those lines before the Report stage. Several hon. Members and myself have an Amendment upon the Paper with a view to reaching some such middle position. That may be a good or it may be a bad Amendment, and we are not in the least tied to the method there suggested.
We submit that something analogous to that would be a proper concession to make in the circumstances. I dissent entirely from the view put forward by the hon. and learned Member for Ash-ford (Mr. Spens) that there is no such thing as mutuality. That principle has been recognised by the House of Lords and by committees. Unless it is to be abolished, that principle must receive consideration in any solution that we reach.

Mr. SPENS: I would like to make it clear that I did not intend to say that there is no such thing as a principle of mutuality. I said that the application of the principle has been grossly exaggerated, and that where one found a mutual association entering into transactions with its members it was not enough merely to say that the transactions were transactions between an association and its members; you had to go on to find out whether those transactions were in the nature of trade giving rise to profits, and if they were, they were taxable under the law as it stands.

Mr. REID: I am sorry if I misunderstood the hon. and learned Member, and I am glad to have his assurance. The extent of the area to which the principle of mutuality applies is a question of fact in each case. Then we get down to something very like common ground. It is only a matter of one man's opinion drawing the line here, and another man's opinion drawing it there. It is not impossible, if that is the view in all quarters of the Committee, given good will, to reach a reasonable solution of this question. I am unable to support this Clause as it appears on the Order Paper; on the other hand, I have no intention of voting against the Government. There is a very distinct case for taxing reserves, in certain cases where they are unfairly used and not used as reserves at all. I am in the uncomfortable position of being equally in disagreement with those who support the Clause and with those who oppose it. The Clause, without a great deal of alteration, can be made one which a great Majority of hon. Members would support.

4.52 p.m.

Mr. CURRY: The hon. Member for Stirling (Mr. J. Reid) has suggested a way by which his objections to these pro-
posals could be circumvented. The proposal which he makes is, in essence, that taxation should be levied upon a subject according to the intent of the subject. That is quite impracticable. What we have to decide, each hon. Member for himself, is whether we are prepared, at this stage, to vote for or against the taxation of the fund which co-operative societies, in their judgment and discretion, have placed to reserve rather than distribute to their members. The principle upon which we can test the question must be upon the principle of mutuality, to which the hon. and learned Member for Ashford (Mr. Spens) paid so much attention. That principle holds throughout the whole of the mutual societies to which the hon. and learned Member referred.
The purpose and the object of the co-operative trading societies is not trading for profit, and there is no way by which you can make out a case to show that the co-operative societies trade with the ultimate intention of making profits. Their whole history goes to show that they have built up their organisation, not in any antagonism to other people, but by showing, to those whom they have induced to become members, that there were certain advantages to be gained by being members of a society. The ultimate advantage which the co-operative societies were able to offer to their members, was a guarantee that, in the ultimate, profit would be eliminated from the transactions. The object of a co-operative society is not to trade for profit, but to trade in such a way as to eliminate profit.
Therefore, the whole of the Income Tax Acts hitherto applied have exempted them from taxation. The Chancellor of the Exchequer now finds that, in order to bring co-operative societies within his net, he must perforce alter the law, and the proposal which we have before us is, by its existence, a complete refutation of the argument that in the co-operative societies there is any desire to trade for profit. I regret very much that there should have crept into our discussions an idea that co-operative societies are engaged in continual war with people who trade under private auspices. That is bad in psychology, and it is untrue in fact. Even if, in the nature of the case, there be some competition between the co-operative movement and private
traders, it is nothing, either in its effect or in its ruthless methods, compared with the competition which exists between the multiple trading concerns and the private traders.
I appeal to hon. Members to look at the co-operative movement and to ask whether it is a movement which we, as legislators, should encourage or retard. The effect, in one way or another, of the tax would be to retard the further development of co-operative societies. In its history, its life and its work, the cooperative movement has been a great power for good in the social life of this country. The work that has been done by some co-operative women's guilds has been of untold benefit to a number of people, from a social point of view.

Mr. MARTIN: Are there no politics in the co-operative women's guilds?

Viscountess ASTOR: Oh, do not you believe it?

Mr. CURRY: All I can say to the hon. Member for Blaydon (Mr. Martin), who comes from the same part of the country as I do, is that if he really believes that there are no politics in those co-operative sections, all that he needs to do in order to find out is to offer to go along and give an address. The co-operative movement has been an untold power for good, and we, as a Legislature, should endeavour to encourage it as far as we can, without doing injustice to any other section of the population. It was argued by the hon. and learned Member for Ash-ford that mutual-trading concerns pay Income Tax under Schedules A and B, and that they should therefore pay Income Tax under Schedule D. [HON. MEMBERS: "Hear, hear!"] I would remind hon. Members, especially those who cheer, that the private trader pays his Income Tax under Schedule A, and that the amount of that assessment is deducted from the amount of the Schedule D assessment, before it is assessed for Income Tax. The co-operative society pays that tax upon Schedule A, although I have never been able to find out why. Because there is no Schedule D assessment, there has never been an opportunity to the cooperative movement to reclaim their payments under Schedule A. The co-opera-
tive movement have acquiesced in that unjust position because they know that they do engage in a certain amount of trade with non-members, which, properly considered, would be taxable. They have allowed that position to grow up in a spirit of compromise, but they have always contended that their payments under Schedule A were far greater in bulk than their trade with non-members would ever be.
What strikes me most in this proposal is the reluctance with which His Majesty's Government have brought it before the House of Commons. If this tax were a just tax, if it were a desirable thing to introduce into our financial system, why should there be this reluctance on the part of the Government in bringing it forward? Why should there be another Committee? Why, even in the Budget speech, could not the proposal be referred to? I venture to suggest that it was brought in only because the Government felt that they could not resist any longer the pressure from other quarters. It is not a voluntary proposal that we are discussing; it is, I believe, a proposal emanating from the pressure of private traders who do not really understand what its effect will be upon private trading in this country.
I have endeavoured to show that the co-operative societies do not trade for profit, and, if profit results and taxation follows, they will eliminate that profit by one of two methods. They may, on the one hand, distribute more to their members by increasing their nominal rate of dividend and thereby making it easier to recognise the advantage to the individual of joining the stores, thus drawing customers away from the private trader, and, if they do increase their dividend, and thus draw customers away from the private trader, let it not be forgotten that the result will be to endanger the financial solvency of the greatest movement in which the working classes of this country have Capttal invested. If that movement should be pursued by taxation to the point of insolvency, the dangers to our existing financial system will be greater than many people imagine.
The co-operative movement will either do that, or they will do what I fear more, and that is reduce their prices so as to eliminate their nominal profits;
and, if the co-operative stores of this country get together in a concerted endeavour to cut their prices and thus eliminate their nominal profits, no retail trader can stand up against that sustained attack. If we, by our legislation, turn the co-operative movement into a state of war against the private trader, the private trader, in the long run, is bound to go under, and I feel it to be my duty to oppose this proposal very largely because of the great concern that I have for the struggling position of many private traders to-day.
On the larger issue, I want to ask the Committee to consider just what we are doing. We are living in a time of great depression, when millions of people have been unemployed for a large number of years. In my own district in the county of Durham, a very large number of the population are now going periodically before commissioners and are having their incomes assessed under the means test. Those who have been thrifty, those who have purchased their own houses, those who have saved up a little money here or there, and who find that by the operation of this test their transitional payments are cut down, are asking, what is the use of thrift? When the man next door, who has lived from day to day just as things came along, not caring for the morrow, is getting more money from the State than they are, these people are asking what is the good of thrift. If we tax the co-operative societies in this way at a time when we are relieving from taxation other sections of the community, and those not the most desirable, we are attacking the only movement that is left as a foundation and bulwark of the thrift of the common people of this country. In my view, this penalisation of thrift is unwise, and is a thing which in due course we shall learn to regret.
I am sorry to have delayed the Committee so long, but I have spoken from a great depth of conviction, having given very careful consideration to the whole of this matter. It seems to me that, by whatever avenue it is approached, the balance of argument is against this tax on grounds of utility, and it has never been suggested that it can be supported on grounds of justice and equity. [HON. MEMBERS: "Oh!"] The Financial Secretary to the Treasury, who is one of
the ablest debaters in the House, tried, when he was winding up the Debate the other day, to follow the argument of mutuality to its logical conclusion, and for the first time I saw him fail in carrying the logic of an argument to the end of the Debate. He said that somehow or other this principle had to be restricted. I have listened very carefully to these Debates, and I have never yet heard anyone who could carry that argument to its logical conclusion and say that in equity and justice this tax could be supported. Therefore, I persoNaily shall oppose it.

5.7 p.m.

Mr. CHAMBERLAIN: I would vcnture to remind the Committee that we have now been debating this Clause for an hour and a-half, and that we have a good many Amendments, a large number of which deal with the same points that have been raised by hon. Members in the course of the Debate. I hope, therefore, that we may find it possible before very long to bring to a conclusion the Debate on the general subject, and come to the Amendments. The hon. Member for Bishop Auckland (Mr. Curry) reproached my hon. Friend the Financial Secretary for a want of logic, but I do not think that, when the hon. Member comes to think over his speech, he will be very proud of his own logic, for, after telling us that the inevitable result of this taxation would be that the "divi" would be increased or the prices would be reduced, he said that the result on the mind of the co-operator would be to cause him to ask what was the good of thrift, meaning by thrift membership of a co-operative society. On his own showing, the co-operator, if the line that he suggests were taken, would be better and not worse off in consequence of this legislation, and I am afraid, therefore, that as regards logic the hon. Member has something to learn from my hon. Friend the Financial Secretary.
Listening to the Debate this afternoon, I could not help observing that the whole case that has been put forward against this Clause is a case for privileged and special treatment. The hon. Member for Bishop Auckland has been talking about the power for good of the co-operative societies in this country. I am not disposed to deny the power for good of
the co-operative societies, but what is the conclusion which the hon. Member draws from that? It is that they should be exempt from taxation which otherwise would fall upon them. The hon. Member for Aberavon (Mr. Cove), who gave us a considerable disquisition upon the Clause, devoted a good part of his speech to declaring and asseverating that there was a definite difference between the ordinary trading concern and the cooperative society. Again, I ask, what was the purpose of that distinction? Why did the hon. Member draw it? It was in order to call attention to the fact that, as he said, the co-operative society is not out to make a profit, and the ordinary trader is. There is no other logical conclusion to be drawn from the speech of the hon. Member than that the co-operative societies, on account of the nature of their trading, and on account of the excellent work that they do, ought to be exempt from the taxation which is imposed upon other concerns which are doing exactly the same sort of trade as the co-operative societies.
The hon. Member for Dumbarton Burghs (Mr. Kirkwood) says that the cooperative movement has not only, by its innate virtues, built itself up into the most important, powerful and firmly based concern in this country, but has also produced the finest specimen of manhood in the House, both mentally and physically, in his own person; and yet he wants to claim for this body, which has built up this position of irresistible strength, special privileges which are not given to other concerns that are doing exactly the same business as the cooperative societies. I cannot understand the logic of that position. It seems to me that, if they are so strong and so powerful that nothing can shake them, if their influence throughout the social structure of our society is acknowledged on all sides to be so good, they are not going to be crippled or destroyed or ruined by the imposition of a tax which in a full year is only going to bring £1,200,000 to the revenue.
The hon. Member for Aberavon once again repeated, and no doubt he will go on doing so until the end of time, that this is penal taxation of a particular section. I have challenged him or any other hon. Member to show why it is penal taxation, but all that he can do is
to go on repeating the same thing over and over again, without giving us any proof, or even argument, which will support his case. What is penal taxation? It is something punitive; at any rate, it is something which is only applied to one section of the community and not to another, or to one individual and not to another. But the hon. Member's whole case was directed to showing that the treatment of the co-operative movement ought to be different from the treatment of other sections of the community. My case it that, as they are doing the same kind of business as the ordinary trader, they ought to make exactly the same kind of contribution to the National Exchequer.

Viscountess ASTOR: Can the Chancellor of the Exchequer tell us whether there Was not a large body in the cooperative movement who would have been willing to compromise with the Government and meet them on this matter, while, on the other hand, there was a large body that wanted to make a political question of it? I think that that is a thing that the House ought to know It is very important, and I would like to know.

Mr. CHAMBERLAIN: I am not going to impute any motives to any members of the co-operative societies. No doubt there were different opinions as to what was the proper course to take. I think it would have been a good thing if we could have got an agreed settlement, and I made a proposal which I thought they might well have accepted, and which would have been advantageous to them. It was not accepted, but I cannot say why it was not accepted, or who was in favour or who was not in favour of accepting it. All that I say is that they had the opportunity, they did not accept it, and that is the reason why the Government had to formulate their own proposals.
I come back to the question of equity. An hon; Member said that he had looked up the word "equity" in the dictionary, and found it to mean moral justice. We accept that definition. That is precisely what we are trying to do, and what we are succeeding in doing. We are trying to do moral justice by this proposal, and, indeed, that is one of the principal motives which induced the Government to introduce the proposal at all. We do
not consider that there 1s moral justice existing at the present time. I think it was the hon. Member for Colne Valley (Mr. Mallalieu) who said that he was concerned with the principle of mutuality, and thought that it was illogical to exclude the "divi" and tax the reserves. In saying that, he showed that he had not really quite understood the explanations which have been given by representatives of the Government from time to time as to what we are really doing. I am given to understand that the hon. Member is the leader of the movement to take the Liberal party across the Floor of the House. He does not look like it, but, if so, he naturally would not look very closely into the nature of the proposal, but would be more anxious to find some reason why he should differ from the Government. The "divi" in this case is not excluded from taxation on the principle of mutuality; it is excluded because it is really a trade expense, comparable with the trade discount which the ordinary trader gives to his customer. It has nothing whatever to do with the principle of mutuality.
No one denies that there is such a thing as a, principle of mutuality. No one denies that a man cannot make a profit out of himself and, if he has a transaction with himself which results in a surplus, you cannot tax that surplus. No one denies that, but, when hon. Members go further and say that anything that arises out of mutual trading can never be taxed at any stage in its history, they are reducing the whole thing to an absurdity. If the hon. Member for Colne Valley, who wants to be very logical in the matter, will consider whither his conclusion carries him, he will see that it is not sustainable, because he cannot stop at reserves. If you say that reserves must not be taxed, you cannot stop there. You must take those reserves and see what happens to them afterwards. You must earmark them and, wherever they may be distributed, you must always say they are to be free from tax because they originated in mutual trading.

Mr. COVE: Are you not, by taxing reserves, taxing on the basis of the use that the money is put to?

Mr. CHAMBERLAIN: It is the contention of the hon. Member for Stirling and Falkirk (Mr. Reid) that the taxation
of reserves should be regulated according to the way in which they are used. He defined the improper use and gave as an example expenditure upon the extension of the business, or the buying of a new business. I should not have thought that that was an improper use. I should have thought it was a very natural use to make of reserves in a business, whether cooperative or non-co-operative. I cannot understand why my hon. Friend behind me should think that it was a proper thing in the case of co-operatives to exclude what he called a proper reserve and not a proper thing to do in the case of an ordinary trading company.

Mr. J. REID: I should be glad to see a similar proposal with regard to all trading companies.

Mr. CHAMBERLAIN: My hon. Friend did not say that. But I was dealing with co-operatives, and, if we are to do moral justice, we must treat co-operative societies and trading societies alike in the matter. The hon. Member for Hudders-field (Mr. Mabane) found a mare's nest, not for the first time. He congratulated the Labour party, who did not receive his congratulations with any enthusiasm, upon having got all they want by the faulty drafting of the Clause. He asked me a question about the word "granted." It did not mean paid out, or we should have said so. Of course, a sum that is granted does not include a sum that is put to reserve. If it is put to reserve, it is not granted. If it is to be granted to individuals, those individuals must be able to claim it after it is granted. They cannot claim it if it is in the reserve. The Clause does what my hon. Friend said it did when he opened the discussion. It taxes the reserve. I maintain that it is quite right to tax the reserve, and that is what we are doing here. It is not merely a matter of legal subtleties.
We need not go into these rather abstruse questions as to the origin of reserves or the question of mutuality. They do not really arise. The broad issue which the Committee has to consider is whether these societies which are carrying on trade in competition with other concerns which are doing exactly the same business, serving exactly the same class of customers and selling the same article, are to be exempt from taxes which other trading concerns have to
bear. I can see no moral justice and no equity in their occupying a special position. As to the rank and file, I do not believe that they are going to be as disturbed in mind as many hon. Members appear to think. The ordinary co-operator in the rank and file will never be able to find any difference whatever after this tax from what happened before. The dividend will be the same unless, in accordance with advice that has been given to-day, it is increased, and he will certainly not complain of that. The ordinary rank and file know nothing about the reserve, do not know what the reserve is, and do not care what becomes of it. They know it is not coming to them. They will not get excited about the taxation of the reserve. What they care about are their dividends.
I quite agree that there is some risk in inserting in an Act of Parliament a provision of this kind which specifically excepts the "divi" of the co-operative societies from taxation, because it may expose us to a claim from other traders to have other returns to their customers excluded from taxation, but recognising, as I did, that there was a genuine suspicion, or anxiety, in the mind of co-operators that it was intended to use this as a first step and, as some time or another, to come to the taxation of dividends, I acceded to the request made to me and put this Sub-section into the Clause which specifically exempts the dividend from taxation by law. I have not received those acknowledgements which I expected to receive; nevertheless. I am willing to believe that hon. Members are really grateful and, that being so, I hope we may now get the Second Reading of the Clause.

5.23 p.m.

Mr. BATEY: I was not surprised when the Chancellor of the Exchequer rose to speak on the Clause just when he did. We have been debating it for a long time but, except for the hon. Member for Ashford (Mr. Spens), not another Member has said a word in favour of the Government. [Interruption.] The Chairman has called several Members of the National party but, when he called them, they were not for the Government. They were against it. I was not in the least surprised that the Chancellor stepped into the breach to try to revive the Spirits of his followers. He said we were
pleading for special treatment for cooperative societies. We never did any such thing. We are fighting against special treatment being meted out to them. We cannot understand why the Government should take this action just at this time. The Financial Secretary to the Treasury said they were following the report of the Raeburn Committee. There is nothing in that report to make any Member of the Government glad to support the tax, because it simply repeats word for word the Royal Commission of 1920. No Chancellor of the Exchequer from that day down to the present time would touch the question. The right hon. Gentleman the Member for Hillhead (Sir R. Home), who was Chancellor of the Exchequer in the Coalition Government, the Lord President of the Council, who was Chancellor of the Exchequer in 1923, the right hon. Gentleman the Member for Epping (Mr. Churchill), who was Chancellor of the Exchequer in 1925, all condemned it. Then we had Lord Snowden, who followed on the same line. Now, after 13 years, we are entitled to say that the Government should not select the Cooperative Movement for taxation. They have had many chances of making it an issue at general elections. There have been five general elections Since 1920 and the Conservative party, who always stand for the private traders, have never attempted to make this an issue. If they had obtained a mandate, they would have had some ground for dealing with it, but we were given to understand at the last election that the National Government would not tax co-operative societies.
It is no use for the Prime Minister to say that what he meant was dividends, and not reserves. We were all questioned in Durham at the last election. The question, however, was not, "Are you in favour of taxing dividends?" but "Are you in favour of taxing co-operative societies" and the Prime Minister's answer was "No; not as long as I am a Member of the National Government." This Government should have been the last to deal with the question after such a definite pledge by the Prime Minister. Why has the Chancellor of the Exchequer done it? Why has he taken this step which is so distasteful to so many of the Members of the National Government at this time? It is the worst time the Gov-
ernment could have chosen Since the Commission reported in 1920 because trade has been getting worse. In many districts co-operative societies are having a worse time to-day than they had in 1920. After listening to the Chancellor of the Exchequer to-day one has the impression that he has done this because he feels the pressure of private trading organisations. It is the private traders who have pressed the Chancellor of the Exchequer to take this step, but when the Bill has been passed and the tax imposed, the matter will not be of any help to the private traders, except that they will perhaps have the selfish satisfaction of seeing a competitor taxed.
I have looked at the evidence given before the Raeburn Committee and seen the list of private traders' organisations which have put pressure upon the Chancellor of the Exchequer and which the Chancellor of the Exchequer is so pleased to conciliate. Among the private traders' organisations I find the British Undertakers' Association. That is an association which can bring pressure to bear upon the Chancellor of the Exchequer. When the British Undertakers' Association begins to bring pressure upon the Chancellor of the Exchequer I am not surprised that he gives way. Then we have the National Association of Master Monumental Masons. After the undertakers, the National Association of Master Monumental Masons come along. This is another organisation which has brought pressure to bear upon the Chancellor of the Exchequer. There is also in the list the Shirt, Collar and Tie Manufacturers' Association. The Chancellor of the Exchequer is to tax the co-operative movement in order to help those associations. There is the Cowkeepers' Association, and the Incorporated Association of Purveyors of Light Refreshments, which is a more cheerful association. There is also the Ham and Beef and Cooked Meats National Trade Association. Those are some of the private traders' associations which the Chancellor of the Exchequer is so keen to help by damaging the cooperative movement. The lone voice of the hon. Member for Ashford said that the Chancellor of the Exchequer is entitled to put a tax upon the co-operative movement because he wants money to pay for unemployment and social ser-
vices. The Chancellor of the Exchequer proposes to get, in a full year, a little over £1,000,000, but we shall not see him getting anything like that amount. He is prepared to be content with £750,000. Is it necessary for the Chancellor of the Exchequer to put a tax upon the cooperative movement in order to get this small amount of money? Did not the National Government give away £500,000 to Morgans in America I A National Government which can pay £500,000 to Morgans' Bank in America as interest do not need to come to the House of Commons and tax the co-operative movement for £750,000.
I recommend the Chancellor of the Exchequer to read the newspapers of the last two or three days. If he is really in need of money there are a lot of people in this country who have too much money and can well afford to pay out some of that money to the Chancellor of the Exchequer. [An HON. MEMBER: "Lady Bowden!"] The taxing of co-operative societies means the taxing of poor people. My colleague below the Gangway mentioned "Lady Bowden." There was a case where a man allowed a wife £41,000 in five years and still she ran into debt. It is simply wicked that there are people in this country with so much money that they do not know what to do with it and how to spend it. [An HON. MEMBER: "She did!"] It is not spent; it is wasted. If it were spent I would not mind, but it is wasted. The Chancellor of the Exchequer should not attempt to tax a movement like the co-operative society unless there was really no other sources of supply at hand. There is an abundance of wealth in this country, and there are sources which the Chancellor of the Exchequer could tap and so leave the co-operative movement alone.
It is no use the Chancellor of the Exchequer saying, "We are not taxing dividends but only reserves." I speak with experience as a director of a co-operative society for 20 years, including nine years as president, when one had to share the responsibility of making up the dividends. We paid money to reserve in order to be able the following quarter to pay it out in dividends. We were always anxious not to allow the dividends to be larger one quarter than another. We ironed out the dividend and made it equal, one quarter with another. In
order to do this we took money from the reserve. This is the experience of all cooperative societies. It is no use the Chancellor of the Exchequer saying that he is not taxing dividends but reserves, because when he is taxing the reserve fund he is really taxing dividends. Does he propose to tax the reserve fund before the co-operative society has paid out its donations. Most co-operative societies give donations to one charity or another, and I should like to know whether the Chancellor of the Exchequer proposes to tax the reserve fund before the donations are paid. There is no more justification for taxing the reserve fund of the cooperative society than there is for taxing dividends. I repeat that of all times this is the worst the Chancellor of the Exchequer could have chosen to take such a step. Since the War co-operative societies, like private traders, have had an extremely bad time. They have experienced difficulties which were undreamt of before the War. In the North of England especially, co-operative societies have had to use the bulk of their reserve funds for the purpose of paying out dividends during these bad years, and it is foolish on the part of the Government to tax them at this time. We shall certainly continue our opposition to the Bill and to the tax because we believe that the Government have simply said to themselves, "Here is a successful working-class organisation, and because it is successful we will make an attack upon it."

5.44 p.m.

Sir WILLIAM DAVISON: Before the Debate closes I think that a few words should be said on behalf of the private traders of this country who have been held up to contempt and ridicule. It is all very well for the hon. Member for Spennymoor (Mr. Batey) to cause merriment and guffaws among the Labour party by mentioning one of the traders' organisations—the undertakers. The Labour party may be in need of the undertakers still more than they were at the last election. The undertakers are an important trade, but they were only one of some 62 great trade societies which I had the honour of introducing to the Chancellor of the Exchequer.

Mr. McGOVERN: Ho, ho.

Sir W. DAVISON: Yes, and ha, ha. The hon. Member will have to wait a
little before the universal trading monopoly for which he hankers has been established in this country. As I was saying, I had the honour of introducing this great body of traders from all parts of the country to the Chancellor of the Exchequer. The hon. Member for Bishop Auckland (Mr. Curry) complained of the unfair warfare against the cooperative societies, which, he said, was being waged by the private traders, and he suggested that after the Clause had been inserted in the Finance Bill and passed into law the private traders would be in a worse state than before and that their trade would be injured. It is not so much the question of the injury to their trade of which the private traders are thinking as the sense of unfairness. They have complained that they are treated in one way and that their rivals in trade are treated in another way.
The hon. Member for Colne Valley (Mr. Mallalieu) and the hon. Member for Aberavon (Mr. Cove) said that the principles of equity and fair play were being violated by these proposals. I submit that the first principle of equity is that those who have the benefit of public services should help to pay for them. When you realise the immense scope of the co-operative societies at the present time, with their 6,500,000 members, 1,200 retail societies, their trade of £217,000,000, surplus of £27,000,000, dividends of £20,000,000 and reserves of £9,000,000, and that they have the advantages of all the great services of this country and the protection of our Army, Navy and Police just as every other citizen—[An HON. MEMBER: "Hear, hear!"] It is all very well to say, "Hear, hear." They have these privileges, and they do not pay for them. Their staffs are educated by the same education system of the State, and they do not make adequate contribution. Their staffs have also the benefit of the great State social services and the protection of the unemployment donation. That is what aggravates the private traders, that they are paying one-fourth of their profits to the State in the way of Income Tax, while the co-operative societies, who are their keen competitors —they do not object to that—are practically exempt from this impost.
Hon. Members opposite laugh at the private trader. I hope the electors will
remember that fact at the next election. The private trader has done very good service. He has allowed working people to run their accounts for a long time in times of stress and strife, if they are old customers, so that they could carry on, and it comes very ill from Members of this House to hold the private trader up to ridicule. Whatever millennium may be in store for this country, we owe a great deal to the private trader, and he should not be held up to ridicule in this Assembly, or anywhere else. The private traders have been under a sense of unfairness, and they pressed the Chancellor of the Exchequer, and we pressed him, to alter a law which has far too long remained on the Statute Book which favours one section of the community as against another.

5.47 p.m.

Mr. ANEURIN BEVAN: I will not follow the hon. Member for South Kensington (Sir W. Davison) into what was almost an irrelevant tirade against co-operative societies. I rise to deal with the speech of the Chancellor of the Exchequer. I have listened to many speeches from the Chancellor of the Exchequer, but never have I listened to any speech so inadequate to an important occasion as the speech he has delivered this evening. He is now so sure of a Majority that he treats these serious matters with a frivolity which is out of keeping with his position. He did a little logic-chopping. He said that an hon. Member who had spoken from the Liberal Benches could not see any logic in the position of the Government, and he went on to point out that the hon. Member for Aberavon (Mr. Cove) had justified his, the Chancellor of the Exchequer's, case in proving the difference between a co-operative Scociety and a private trader, and that, having proved the difference, he was asking, because they were different, that the co-operative societies should be exempted from taxation. I have read the speech of the Chancellor of the Exchequer on this subject, and I listened to it, and I understood that he admitted that the primary difference between the co-operative societies and the private traders was that the co-operative societies are engaged in mutual trading.
The right hon. Gentleman has admitted, as I think every Government
spokesman has admitted, that the principle of mutual trading should be exempt from taxation. I understood that it had been agreed that those who are engaged in mutual trading should not be subject to taxation. I understand that has been the position taken up by Members of the Government all through the dispute. I would ask the Financial Secretary to the Treasury, in the absence of the Chancellor of the Exchequer, if it is admitted by the Government that the principle of mutual trading should not carry taxation, how does he square that principle with the taxation of undistributed dividends.? A reserve is simply an indication by the potential dividend receiver that he does not intend to take his dividend in that quarter. If all the surplus were distributed among the members of a society on a single Thursday morning at the co-operative stores, and after they had had it in their individual hands they went back and put it into the custody of the co-operative society, it would not be taxed, but if they come together at a quarterly meeting and say: "We will simply take half of the surplus this quarter and leave the other half in the custody of the co-operative society," the Chancellor of the Exchequer proposes to tax it. That is the simple issue. It is no more complicated than that, and it is no good Members of the Conservative party trying to make it more complicated.
The Chancellor of the Exchequer has admitted that there is a difference between a small community mutually trading and a large community mutually trading in the way in which the co-operative movement does. There is a difference, and it is that difference which the Chancellor of the Exchequer is attacking. It is the difference between an unsuccessful co-operative society and a successful co-operative society. The Chancellor of the Exchequer is saying that as long as the co-operative societies were not a menace to the private trader, we did not bother about them. We were prepared to admit that the principle of mutual trading should be untaxed, because the advantages were small, but now that the co-operative movement has grown into a most formidable engine in commercial competition, challenging the supremacy of the private trader and slowly driving the private trader out of the distributive market, the Chancellor of the Exchequer,
not in his capacity as an impartial distributor of justice but as a leader of the Conservative party, comes forward and says: "This successful trade enterprise must receive a setback. We must tax it, because it is now too successful."
I am prepared to admit that the Members of the Liberal party in this as in other ways, are able to serve two interests, the interests of the private trader and of the co-operative society. It is difficult to see how in this taxation the Chancellor of the Exchequer succeeds in achieving his object. It is not because his motives are not vicious, but because his motives are so stupid. It is true that be intends, if he can, to deal a deadly blow at the co-operative societies, but he is not ingenious enough to do it. If we seek an explanation why the Chancellor of the Exchequer is doing this now, that explanation is to be found in the uneasy position of the National Government. The primary weakness of a huge Majority and of a National Government so composed is that the elements inside the Cabinet are continually engaged in a tug-of-war. The President of the Board of Trade has stRuggles inside the Cabinet in getting his commercial treaties endorsed there and in the House. Then, Conservative opinion says that the Chancellor of the Exchequer must have a victory, too. Many of the diehard Members of the Conservative party have been so concerned about the move towards the left in the Cabinet, that in order to maintain an easy equipoise, a movement towards the right had to be made. It did not matter if it was stupid. The more stupid it was, the more favourable would be its reception at the Carlton Club. The thing was, that there had to be a symbolic move towards the right. That it was not a real move did not count, because this is not a Government of reality, but of symbolism.
The Chancellor of the Exchequer said: "You must give me something to throw to the wolves. You have annoyed many members of my party with these trade agreements. Therefore, let us have this co-operative tax." They are proposing this tax to show how Tory they are. It may be said that this is a sort of "Alice in Wonderland" interpretation of the motives of the National Government, but I should like to know of any other. I should like some Member of the Conservative party to tell me why if it is equitable
to tax co-operative societies in 1933, it has never been done before. Will the Financial Secretary to the Treasury tell us what change has occurred in the circumstances, what alteration has taken place in the position of co-operative societies, what changes have occurred in the principle of trading, that have made it necessary in 1933 for the National Government to decide to tax co-operative societies, and not to adduce a single new argument in favour of that taxation? It will be no use the Financial Secretary saying there has been the committee of inquiry. The committee of inquiry disclosed nothing new. All the arguments that were used before that committee, and all the evidence that was examined there have been used and examined before. No new set of circumstances has been disclosed.

Mr. ALBERY: Did not the committee refer to the fact that a larger amount of revenue could be raised?

Mr. BEVAN: The hon. Member has far too acute an intelligence and he is far too experienced to believe that the National Government are exposing themselves to this attack just for the sake of £1,250,000 a year. The Chancellor of the Exchequer has disclaimed this tax merely as a means of augmenting his revenue. He has claimed that it is necessary merely in order to put the co-operative societies into equitable relationship with the private traders. That is what the right hon. Gentleman has said, but he has not proved it by a single argument. He has simply repeated it, in the hope that by frequent repetition people will accept it as a truism. When he spoke on this subject, he said:
I do not think anybody disputes the principle of mutuality in its simplest form. It is quite clear that a man cannot make a taxable profit by trading with himself.
The Chancellor of the Exchequer, as distinct from the Prime Minister, always puts his argument clearly. He went on:
If a number of people combine together to buy, let us say, a truck of coal, then the saving which each individual may make out of a transaction of that kind cannot be said to constitute a profit which is assessable to Income Tax.
That is clear.
But when you come to these vast organizations…"—
That is the point; when the little man has grown up to be a big man, you attack him—
you are dealing with something in a very different category, something which goes much further than the mere joint purchase or sale by a group of individuals."— [OFFICIAL REPORT, 22nd May, 1933; col. 776, Vol. 278.]
It is of no account to the Chancellor of the Exchequer that eminent judges have declared that you cannot distinguish between a simple form of mutual trading and large combinations of co-operative societies of to-day.

Mr. PIKE: Is the hon. Member also aware that according to the hon. Member for St. Rollox (Mr. Leonard) on May 22nd, the Chancellor of the Exchequer:
asked our representatives to see him, and he actually offered to amend the law in order to give complete immunity from Income Tax for all surplus arising from mutual trade provided we agreed to pay."— [OFFICIAL REPORT, 22nd May, 1933; col. 815, Vol. 278.]

Mr. BEVAN: Yes, what the Chancellor of the Exchequer wanted to do on that occasion was to obtain money from the co-operative societies and still put his Conservative followers in the House of Commons in the position of being able to say in their constituencies that the cooperative societies knew that it was equitable because they had agreed to pay it. The Chancellor of the Exchequer wanted to have it both ways.

Mr. PIKE: Is it not possible, on the other hand, that the co-operative societies in refusing did so simply and solely because a much greater difficulty would arise for them in proving the strength of their mutual trading?

Mr. BEVAN: The answer to that is that if the contention of the co-operative societies is correct, that their undistributed dividends ought not to be taxed, out of what could they pay blackmail to the Chancellor of the Exchequer? There would be no funds not already taxed at their disposal. The Chancellor of the Exchequer said: "I am the Chancellor of the Exchequer, and I have a big Majority in the House of Commons. I am in the position of having to prove that the National Government is a good Tory Government, and I must therefore tax co-operative societies. But I want to tax them in such a manner as will obtain for me a personal following in the House of Commons and secure that the Conservative party are not attacked in
the constituencies. How can I bring about that highly desirable result? I will negotiate a tax with the co operative societies. I shall have the best of both worlds. I shall be able to throw a sop to my Conservative followers in the House of Commons while I put my people in the country in the position of being able to say that the co-operative societies knew that this was fair because they had agreed to it." The Chancellor of the Exchequer has never taken to heart the dictum of Ferdinand Lassalle that you can never be clever in big things, you will be found out.
The co-operative societies said: "This is a perfectly simple issue; we cannot have this Americanisation of British politics. It is a simple question, are we liable in equity for the tax, or are we not? If we are liable there is no need for this blackmail. Let the Chancellor of the Exchequer go forward with his proposals, we are not going to try to save some money by paying out money which we need not pay." The co-operative societies took up a stand which I hope every English citizen will take up in similar circumstances. It was a disgraceful and discreditable incident in the history of Government in this country that the Chancellor of the Exchequer should have sought to do what he did. I should like to know from the Financial Secretary, with his incomparable debating skill, how he distinguishes between the individual co-operator who, in his capacity as a policy maker of the society, says, "I am going to take half my dividend and leave the other half in my own custody in the co-operative society, and take it out next month," and the individual who says, "I will have the whole lot this half year?"
The Chancellor of the Exchequer has failed to give us an explanation. He has continued his shady and discreditable career this evening by assuring his Conservative followers that they need not worry about this, there will he no political difficulties arising out of it because the co-operative member will not know, he will not hear about it, he is so little interested in these matters, he is such an ignorant person, he never reads the balance sheet of his society, therefore, you can tax him without having to put up with the political consequences of a robbery. It is an indecent position for
a Chancellor of the Exchequer to take advantage of the pre-occupation of ordinary citizens in their private activities and that because he knows the private citizen is so pre-occupied he can steal some money out of his pocket without his knowing it. That is not a proper point of view for a Chancellor of the Exchequer to take up. But it shows how ignorant the Chancellor of the Exchequer is of the co-operative society that he should advance such an argument. Members of co-operative societies are always actively interested in what is happening, and I know of no democratic institution where a larger percentage of members take an interest in the policy of their organisation. They attend the quarterly meetings regularly and ask questions about trade policy. If the Chancellor of the Exchequer thinks that he is going to get away with it because they will not learn what is happening he is making one of the greatest mistakes of his political career. This is a narrow issue, although some people have attempted to complicate it by dragging in other questions. [Interruption.] It is not simple in its political mechanism; that is devious and complicated and will not stand examination, but the tax itself is simple and easy to understand. Therefore, I want the Financial Secretary to tell us how he makes the distinction, which is to be made for the purposes of this tax, which his superior, the Chancellor of the Exchequer, has not yet made clear to hon. Members.

6.8 p.m.

Sir BASIL PETO: I rise to ask the Financial Secretary to explain to the Committee why the wording of Subsection (3), paragraph (a) is so wide. It is not possible to move any Amendment because it may increase the charge, and this is the only opportunity I shall have of calling attention to this point. The wording of this Sub-section does not agree with the taxing Clause which precedes it, or with the Act of 1918. The broad distinction which is drawn between trading with members and non-members in the matter of taxation is absent in the case of dividend which is to be allowed as a trading expense, whether it is paid to members or to other persons. The Financial Secretary in his opening speech said that there was no intention of touching the "divi", that was to be allowed
as a trade expense, and that point was confirmed by the Chancellor of the Exchequer. If that is the purpose, why is it necessary to define it as:
A discount, rebate, dividend or bonus.
Are co-operative societies, after they have paid their dividend, to be able to say, "We have paid all we intend to pay as dividend, but we are going to pay a bonus, and that can be deducted as trade expenses as well as the 'divi'." Then, again, while there has always been a broad distinction between trading with members and non-members, trading with non-members has not prevented co-operative societies evading taxation under Schedules C and D because it has been linked up with the further words:
Unless it sells to persons not members thereof and the number of its shares is limited by rule.
That has been held to mean that both these conditions must apply before exemption to Income Tax under Schedules C and D can be claimed. Therefore, I ask, why is it necessary to say here that dividends can be paid not only to members of a society but to the general public trading with the co-operative society at their various stores? That is something quite contrary to anything we have heard. Then, not only are they allowed to deduct the dividends paid to members but we get the words:
Or payable by or to them.
These are very wide words. Not only is the dividend paid at regular intervals to members of co-operative societies in proportion to the amount of their trading with the society to be deducted, but a mysterious sum, which I cannot understand, paid by members of a society. It is not only dividends paid to members of the society which are to be allowed, but sums paid by them. Under what circumstances can you allow a dividend on sums paid by members of a society? These are the questions upon which I should like the Financial Secretary to give me a reply and tell us why it is necessary to make these words so extremely wide.

6.15 p.m.

Sir STAFFORD CRIPPS: The right hon. Gentleman the Chancellor of the Exchequer said he Was sorry that we had not expressed our gratitude to him. We are grateful to him for inserting Sub-
section (3) in this new Clause. I am sure it was a wise thing to do, and it will put at rest any doubt as regards the matters that it contains. I hope, as we proceed with the Amendment, the right hon. Gentleman or the Financial Secretary will tell us how far this deduction covers moneys which are reserved for dividend apart from payments for dividend. I rather expect him to say that it is not necessary to cover these reserves, because when the money is eventually paid out it will be a deduction. I would like him to explain this: Suppose that money which goes to reserve for dividends is taxed, and then in a subsequent year is paid out—will it be possible to recover the tax which was charged on. that when it went to reserve?
The hon. and learned Gentleman the Member for Ashford (Mr. Spens) advanced an argument as regards mutuality and mutual trading which, I suggest, is not a sound one. But the remarkable thing about his speech in support of the Clause was that he did not attempt to justify the Clause upon the only basis upon which the Government are attempting to justify it, that is, the difference between incorporated and unincorporated societies. The Committee will have noticed, I hope, that so far as unincorporated societies are concerned this Clause leaves them exactly as before. Mutual trading will only result in surpluses which cannot be dealt with as profits where they are put to reserve or distributed by way of dividend or bonus. So that, as regards unincorporated societies, the principle of mutuality is to continue. The only distinction that is made by the Chancellor of the Exchequer and the Financial Secretary, is that because of incorporation mutuality is destroyed. That is an argument which naturally the hon. and learned Member for Ashford, being a lawyer, could not conceivably advance. No one could advance such an argument, because it has been said over and over again, not because of any law, but because of ordinary common sense, that the fact of incorporation cannot alter the nature of the surpluses arising from mutual trading.
Therefore, we are still left with a wholly unexplained reason in this Clause for destroying mutuality in the case of incorporartion. It is that to which I wish
the Financial Secretary to bend his mind. Let me give him the case of a society of 15 persons trading together, unincorporated, mutual investment, or anything else you like; and a similar society, incorporated, 15 persons, trading together for identical purposes and doing identically the same business. What reason is there for saying that one of them shall pay Income Tax and that the other shall not? It is not a question of size. I can understand the fear of the small trader for the growing success of the co-operative movement. But the distinction which the Government have introduced into the law in this Clause is not that distinction. An incorporated society, however small it may be, will have to pay this tax, and an unincorporated society, however large, will not have to pay it. We still wait to hear why the principle of mutuality is different for an incorporated and an unincorporated society.
I hope that the Financial Secretary is not going to talk about a legal entity, or anything of that sort, because that cannot conceivably make any difference whatever. It may be that in some legalistic argument it might make a difference, but in the nature of the tax itself, where it is a question of the incidence of taxation, it really cannot make any difference whether 15 people who are trading mutually happen or do not happen to be registered or incorporated. The Chancellor of the Exchequer sought to draw a distinction between reserves and dividends. He said that the co-operators in the country would never know that the reserves were taxed. I wonder where the right hon. Gentleman thinks that the £1,250,000 that he is to take from the co-operative societies is coming from? It has to come from some annual income that the co-operators make. It has not to come out of Capttal. The money that they make in a year has either to be distributed in the form of dividends or put to reserve.

Mr. HOWARD: Or used for Capttal expenditure.

Sir S. CRIPPS: The reserves may be used for any purpose, and if a greater sum has to be provided annually for the Exchequer either the dividend or the reserves have to suffer for it. That is obvious. If the same prudence guides the co-operative movement in the future
as has guided it in the past, the societies will have to put the same sum to reserve, and therefore the amount available for dividend will be diminished by £.1,250,000, which is the amount that the Chancellor of the Exchequer wants. It must be perfectly apparent that it is only by cutting down the sum put to reserve that the dividend can be maintained. It may be that over a course of years co-operative societies may decide to diminish the amount put to reserve. I do not know what policy they will follow. But in the long run, if the sums put aside to reserve are prudent sums, it must mean a reduction in the dividend.
I suggest that the right hon. Gentleman is a little bit too hopeful in thinking that the 6,250,000 co-operators are going now to say, "Now the Chancellor of the Exchequer has told us that it will not make any difference, we will not bother about it any further." He will find up and down the country, in the next year or so, that there will be quite a lot of bother about this tax, and some of his followers may find that it will bother them out of their constituencies altogether. This point, of course, as to the similarity of sums put to reserve and distributed by way of surplus, has long ago been considered and decided by the courts, again not upon any question of interpretation of any Act but upon the common sense of the matter. In the South-West Lancashire Coalowners' case the very point was raised as to whether money put aside as reserves and not distributed in the course of the year from mutual payments was or could be considered as profits taxable, and the House of Lords held that in the nature of things it could not be held to be profits, and the fact that it was put aside as reserve and not immediately distributed could have no bEarlng upon the problem from the point of view either of equity or from the point of view of the meaning of the word "profit" when one was considering mutual surpluses.
We are wholly and absolutely unconvInced by the many divergent arguments which have been put forward as excuses for the imposition of this taxation. None of the arguments is convincing, and most of them are mutually destructive. We shall certainly carry on the opposition to this Clause as far and as long as possible,
and I am sure that that opposition will be carried on in the country as well.

6.23 p.m.

Mr. HORE-BELISHA: Two or three specific questions have been put to me, and I will try now to answer them. I have been asked with much insistence why, if we exempt dividend because it is mutual, we do not exempt reserves because they are mutual. That was the whole theme of the speech made by the hon. Member for Ebbw Vale (Mr. A. Bevan). He defied me to give any reply. The answer is that the dividend is not exempt because it is mutual; the dividend is exempt because it is a trading expense. Consequently my hon. Friend's desire to associate the two as coming from a common source falls entirely to the ground. The dividend is a trade expense and is not treated by us on any mutual basis whatever. The whole of the discussion has concentrated on that part of the new Clause which deals with the exemption of the dividend. My hon. Friend the Member for Barnstaple (Sir B. Peto) was confused by the wording of Sub-section (3). I will endeavour to clear up the doubts which exist in his mind. The Sub-section says that in computing the profits or gains to be chargeable to tax there are to be deducted as expenses any sums which represent "a discount, rebate, dividend or bonus." My hon. Friend wants to know why these varying words are used. All these words mean the same thing in law in the context in which we use them. Some societies use one expression and other societies use another. Agricultural marketing societies in particular use the word "bonus," and it is for that reason that we have employed the word here, so that there may be no possible doubt. The principle remains the same. The dividend will be allowed as an expense. Whether the word used by a particular society be dividend, rebate, discount or bonus, the principle will still be observed.

Mr. A. BEVAN: How can the Financial Secretary argue that he can change the character of an object by changing the name that he applies to it? The dividend is actually distributed as the result of mutual trading. It would never be there if that were not so. Dividends the Chancellor of the Exchequer is going to tax in their nature as due to mutual trading but he is going to exempt them
as a trade expense. But surely the undistributed money has been reached by exactly the same trade process as the distributed dividend? The hon. Gentleman does not alter the nature of it by altering the name of it.

Mr. HORE-BELISHA: My hon. Friend is on a quite different point. There is nothing mutual about a dividend. These societies pay dividends to non-members. A discount is payable by any commercial undertaking. It has nothing whatever to do with mutuality, nor is there anything necessarily to do with mutuality in any of the words here used, which for practical purposes are synonymous. Then my hon. Friend went on to read these words of the Sub-section:
granted by the company or society to members or other persons.
And he asked why "other persons"? For precisely the reason which I have just indicated in reply to the hon. Member opposite. The members or other persons are the customers of the society. Whether they be members or not, they may receive the benefit of the dividend and, if they do, then the dividend will be allowed as an expense. It surely does not matter whether the dividend is granted to a member or a non-member— it is a trading expense.

Sir B. PETO: It matters enormously as to the character of the trade or business that the co-operative societies will be able to carry on in the future. They will be able to do any kind of trade or business—not what we recognise as the trade usually done in a co-operative store, but a trade in competition with any business in the country.

Mr. HORE-BELISHA: I hope I can make this matter plain to my hon. Friend. The dividend or discount is allowed both in the case of ordinary oompanies and in the case of the co-operative societies. We here put them on exactly the same basis in allowing that discount or dividend to be treated as a trading expense. That has nothing to do with the question of trading with members or with other persons. The simple fact is that the discount is allowed as a trading expense and we draw no distinction between the ordinary trading company and the co-operative society. That is the reason why we use the phrase, "members
or other persons. "Then as to the next words" in respect of amounts paid, or payable by or to them, "this dividend is allowed in respect of amounts paid by the members—that is when they purchase —and in respect of amounts paid to the members—that is when they sell. Cooperative societies are of two kinds. Some buy and some sell. Therefore the dividend is allowed in the one case on the sums payable by them, and in the other case on the sums payable to them.

Sir B. PETO: Will the hon. Gentleman explain how any individual or company engaged in selling articles can receive a discount? It is for that person or company, surely, to give a discount.

Mr. HORE-BELISHA: There is, for instance, the case of an agricultural society which buys pigs from its members and then sells them. If that society receives a sum of money for the pigs which is in excess of what has teen paid to the members it gives what is, in that. case, a bonus, to the persons who have sold the pigs to it, and that is equiva-lent to the dividend in the case of the retail trade. I think those were the main difficulties in the mind of my hon. Friend.

Sir B. PETO: The hon. Gentleman's explanation is very different to the way it will work out in actual practice.

Mr. HORE-BELISHA: I am glad if my hon. Friend is now satisfied. The difficulties of the hon. and learned Gentleman the Member for East Bristol (Sir S. Cripps) turned to some extent on the use of the word "granted." He wanted to know whether if dividend were paid out of the reserves in a subsequent year it would be allowed. If it is paid out in a subsequent year it will be treated as a trading expense when it is actually granted, and therefore it does not matter whether it is paid out of reserve or not. It will be allowed as a trading expense of the year for which it is actually granted.

Sir S. CRIPPS: If Income Tax had been paid on those reserves before, would a claim be allowed for a return of that Income Tax when there is such a distribution?

Mr. HORE-BELISHA: No, because we allow the sum paid as dividend, even if it comes out of reserve, to be set off as a trading expense. You could not
have both. You could not have a refund of Income Tax in respect of it, and also an allowance as a trading expense. We here observe the principle, even though the hon. and learned Gentleman may not like it, of giving exactly the same treatment to the company and to the co-operative society in every detail and in every respect.

Mr. MABANE: As this is a point which I raised earlier, may I ask, if dividend is granted in a certain year and members agree not to take out the whole of it, what will be the position? Suppose that a dividend of 2s. 6d. in the £ is granted but the members agree to take only 2s. 3d., will the whole of the 2s. 6d. be exempt from taxation?

Mr. HORE-BELISHA: Of course, a member can do what he likes with his dividend, and, if he wishes to invest it, he can invest it. But the Clause is perfectly plain. It says:
granted by the company or society to members or other persons.
From the moment it is granted, it is taken into the accounts of that year and is at the disposal of the members of the society who can do whatever they like with their own money.

Mr. GODFREY NICHOLSON: Is it not possible to vote some of the dividends to reserve?

Mr. HORE-BELISHA: If they do that then the reserves will be taxable. [HON. MEMBERS: "No!"] If a member is granted dividends that dividend is free from tax. If the money is put to reserve, it does not matter what the reserve be called—dividend equalisation reserve or any other kind of reserve— that money bears tax.

Mr. NICHOLSON: Ought not members to be able to reclaim tax in a subsequent year on reserve that is distributed as dividend, if their incomes are below the Income Tax level?

Mr. HORE-BELISHA: There are only two contingencies to be contemplated here. If the dividend be paid to the member that is a trading expense. It then becomes the member's property to be disposed of as he likes. If he invests it in a taxable investment the income which he receives will be taxed. If he leaves it in the reserves of the society,
owing to some strange unusual rule which that society may have, it is considered by us to be put to reserve.

Mr. NICHOLSON: Although it passed through the hands of the member?

Mr. HORE-BELISHA: If it is put to reserve it is in the reserves and the reserves are taxed separately. If it is paid to the member and retained by the member or kept under the control or at the disposal of the member, then of course it is a trading expense.

6.38 p.m.

Captain ARCHIBALD RAMSAY: The hon. Gentleman assumes that the position of reserves in the case of the co-operative society is on all fours with the position of reserves in the case of an ordinary trading company. I suggest that such is not the case. If a co-operative society and a trading company in the same place decided to put all their profits to reserve, the position of the shareholder in the ordinary trading company would be reflected in the price of his shares. In the case of the co-operative society there is no reflection of such a policy in the shareholding, and the co-operator gets no benefit at all from that policy of thrift. Therefore, I suggest that it is unfair to treat the two as being on all fours.
We have all been greatly relieved to hear the Chancellor of the Exchequer deal with this question simply from the point of view of principle. Those of us who have had much correspondence and many meetings on this subject are aware that although a case may be argued on that basis—I myself do not agree with it—the impetus behind this movement does not arise on the question of principle. The impetus comes from people who are afraid of this kind of trading and who put forward, as they may do quite legitimately, reasons for trying to restrict it. But I think the real driving force behind this movement is probably the objection—also very legitimate—felt by many people to the political attitude of certain co-operative societies. As a Scotsman who supports the National Government-I wish to say that in Scotland in this respect there is very fair behaviour on the part of most co-operative societies. They play fair and square, and I think it would be a great mistake to take any political action which, rightly or wrongly, would impress on the minds
of millions of people that they were going to be subjected to taxation on such grounds. I think such a course of action would have the effect of driving them into political activities in which they had not engaged before. Therefore, we are particularly relieved to hear the Chancellor of the Exchequer base this case on the ground of principle, on which we know it can be argued. Perhaps the

right hon. Gentleman will tell us, does he really regard the position of co-operative society reserves and ordinary trading company reserves as being on all fours for tax purposes, because I suggest that they are fundamentally different.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 253; Noes, 77.

Division No. 212.]
AYES.
[6.42 p.m.


Acland-Troyte, Lieut.-Colonel
Drewe, Cedric
Jones, Lewis (Swansea, West)


Adams, Samuel Vyvyan T. (Leeds, W.)
Duckworth, George A. V.
Ker, J. Campbell


Albery, Irving James
Dugdale, Captain Thomas Lionel
Kerr, Hamilton W.


Allen, Lt.-Col. J. Sandeman (B'k'nhd.)
Duncan, James A. L. (Kensington, N.)
Kimball, Lawrence


Amery, Rt. Hon. Leopold C. M. 8.
Dunglass, Lord
Knox, Sir Alfred


Anstruther-Gray, W. J.
Ellis, Sir R. Geoffrey
Lamb, Sir Joseph Quinton


Applin, Lieut.-Col. Reginald V. K.
Elliston, Captain George Sampson
Law, Richard K. (Hull, S.W.)


Astor, Maj. Hn. John J.(Kent, Dover)
Emmott, Charles E. G. C.
Leighton, Major B. E. P.


Bailey, Eric Alfred George
Emrys-Evans, P. V.
Levy, Thomas


Baldwin, Rt. Hon. Stanley
Entwistle, Cyril Fullard
Liddall, Walter S.


Balniel, Lord
Erskine, Lord (Weston-super-Mare)
Lindsay, Noel Ker


Barclay-Harvey, C. M.
Evans, Capt. Arthur (Cardiff, S.)
Lister, Rt. Hon. Sir Philip Cunliffe-


Beaumont, M. W. (Bucks., Aylesbury)
Everard, W. Lindsay
Lloyd, Geoffrey


Beaumont, Hon. R.E.B. (Portam'th.C.)
Faile, Sir Bertram G.
Locker-Lampson, Rt. Hn.G.(Wd.Gr'n)


Belt, Sir Alfred L.
Fermoy, Lord
Loder, Captain J. de Vere


Benn, Sir Arthur Shirley
Fielden, Edward Brocklehurst
Lyons, Abraham Montagu


Betterton, Rt. Hon. Sir Henry B.
Forestier-Walker, Sir Leolin
Mac Andrew, Lieut.-Col. C. G.(Partick)


Birchall, Major Sir John Dearman
Fraser, Captain Ian
MacAndrew, Capt. J. O. (Ayr)


Bird, Ernest Roy (Yorks., Skipton)
Fremantle, Sir Francis
Macdonald, Sir Murdoch (Inverness)


Bird, Sir Robert B.Wolverh'pton W.)
Galbraith, James Francis Wallace
McLean, Major Sir Alan


Bossom, A. C.
Ganzoni, Sir John
Macquisten, Frederick Alexander


Boulton, W. W.
Gibson, Charles Granville
Maitland, Adam


Bowyer, Capt. Sir George E. W.
Gillett, Sir George Masterman
Makins, Brigadier-General Ernest


Braithwaite, J. G. (Hillsborough)
Gilmour, Lt.-Col. Rt. Hon. Sir John
Margesson, Capt. Rt. Hon. H. D. R.


Brass, Captain Sir William
Gledhill, Gilbert
Marsden, Commander Arthur


Broadbent, Colonel John
Glossop, C. W. H.
Mason, Col. Glyn K. (Croydon, N.)


Brown, Col. D. C. (N'th'I'd, Hexham)
Gluckstein, Louis Halle
Mayhew, Lieut.-Colonel John


Brown, Ernest (Leith)
Goff, Sir Park
Meller, Richard James


Brown, Brig.-Gen. H.C.(Berks., Newb'y)
Goldie, Noel B.
Mills, Sir Frederick (Leyton, E.)


Browne, Captain A. C.
Goodman, Colonel Albert W.
Mills, Major J. D. (New Forest)


Buchan-Hepburn, P. G. T.
Gower, Sir Robert
Mitchell, Harold P,(Br'tf'd & Chisw'k)


Burnett, John George
Grattan-Doyle, Sir Nicholas
Mitchell, Sir W. Lane (Streatham)


Butler, Richard Austen
Graves, Marjorie
Moore, Lt.-Col. Thomas C. R. (Ayr)


Cadogan, Hon. Edward
Grentell, E. C. (City of London)
Morris, Owen Temple (Cardiff, E.)


Campbell, vice-Admiral G. (Burnley)
Gretton, Colonel Rt. Hon. John
Morris-Jones, Dr. J. H. (Denbigh)


Campbell-Johnston, Malcolm
Grimston, R. V.
Morrison, William Shephard


Canorn, Arthur Cecil
Gritten, W. G. Howard
Munro, Patrick


Carver, Major William H.
Guest, Capt. Rt. Hon. F. E.
Murray-Phillpson, Hylton Raiph


Cassels, James Dale
Guinness, Thomas L. E. B.
Nail-Cain, Hon. Ronald


Cautley, Sir Henry S.
Gunston, Captain D. W.
Nation, Brigadier-General J. J, H.


Cayzer, Sir Charles (Chester, City)
Hacking, Rt. Hon. Douglas H.
North, Edward T.


Cayzer, Maj. Sir H. R. (Prtsmth., S.)
Hamilton, Sir George (Ilford)
Nunn, William


Cazalet, Thelma (Islington, E.)
Hanbury, Cecil
O'Connor, Terence James


Chamberlain, Rt. Hon. N. (Edgbaston)
Hanley, Dennis A.
O'Donovan, Dr. William James


Clarke, Frank
Hannon, Patrick Joseph Henry
O'Neill, Rt. Hon. Sir Hugh


Clarry, Reginald George
Harbord, Arthur
Ormsby-Gore, Rt. Hon. William G.A.


Cobb, Sir Cyril
Harvey, Major S. E. (Devon, Totnes)
Palmer, Francis Noel


Colfox, Major William Philip
Haslam, Henry (Horncastle)
Penny, Sir George


Collins, Rt. Hon. Sir Godfrey
Headlam, Lieut.-Col. Cuthbert M.
Percy, Lord Eustace


Colville, Lieut.-Colonel J.
Heilgers, Captain F. F. A.
Petherick, M.


Conant, R. J. E.
Heneage, Lieut.-Colonel Arthur P.
Peto, Sir Basil E. (Devon, Barnstaple)


Courthope, Colonel Sir George L.
Hepworth, Joseph
Pike, Cecil F.


Craddock, Sir Reginald Henry
Herbert, Capt. S. (Abbey Division)
Potter, John


Croft. Brigadier-General Sir H.
Hills, Major Rt. Hon. John Waller
Power, Sir John Cecil


Crooke, J. Smedley
Hore-Belisha, Leslie
Ramsay, Alexander (W. Bromwich)


Crookshank, Col. C. de Windt (Bootle)
Hornby, Frank
Ramsbotham, Herwald


Crookshank, Capt. H. C. (Gainsb'ro)
Howard, Tom Forrest
Ramsden, Sir Eugene


Croom-Johnson, R. P.
Hudson, Capt. A. U. M. (Hackney,N.)
Rankin, Robert


Cruddae, Lieut.-Colonel Bernard
Hudson, Robert Spear (Southport)
Reed, Arthur C. (Exeter)


Dalkeith, Earl of
Hume, Sir George Hopwood
Reid, David D. (County Down)


Davidson, Rt. Hon. J. C. C.
Hunter, Capt. M. J, (Brigg)
Rentoul, Sir Gervals S.


Davies, Maj. Geo. F. (Somerset, Yeovil)
Inskip, Rt. Hon. Sir Thomas W. H.
Rhys, Hon. Charles Arthur U.


Davison, Sir William Henry
Iveagh, Countess of
Roberts, Sir Samuel (Ecclesall)


Denman, Hon. R. D.
Jackson, Sir Henry (Wandsworth, C.)
Ropner, Colonel L.


Donner, P. W.
Jamieson, Douglas
Rosbotham, Sir Samuel


Doran, Edward
Jesson, Major Thomas E.
Ross Taylor, Walter (Woodbridge)


Runge, Norah Cecil
Southby, Commander Archibald R. J.
Vaughan-Morgan, Sir Kenyon


Russell, Alexander West (Tynemouth)
Spender-Clay, Rt. Hon. Herbert.H.
Wallace, Captain O. E. (Hornsey)


Rutherford, John (Edmonton)
Spens, William Patrick
Wardlaw-Milne, Sir John S.


Rutherford, Sir John Hugo (Liverp'l)
Stanley, Hon. O. F. G. (Westmorland)
Warrender, Sir Victor A. G.


Salmon, Sir Isidore
Steel-Maitland, Rt. Hon. Sir Arthur
Waterhouse, Captain Charles


Salt, Edward w.
Stevenson, James
Wayland, Sir William A.


Samuel, Sir Arthur Michael (F'nham)
Storey, Samuel
Wells, Sydney Richard


Samuel, Samuel (W'dsworth, Putney)
Strauss, Edward A.
Whiteside, Borras Noel H.


Sandeman, Sir A. N. Stewart
Strickland, Captain W. F.
Whyte, Jardine Bell


Sanderson, Sir Frank Barnard
Stuart, Hon. J. (Moray and Nairn)
Williams. Herbert G. (Croydon, S.)


Scone, Lord
Sueter, Rear-Admiral Murray F.
Wills, Wilfrid D.


Shaw, Helen B. (Lanark, Bothwell)
Summersby, Charles H.
Wilson, Clyde T. (West Toxteth)


Shepperson, Sir Ernest W.
Thompson, Luke
Wilson, G. H. A. (Cambridge U.)


Skelton, Archibald Noel
Thomson, Sir Frederick Charles
Windsor-Clive, Lieut.-Colonel George


Smiles, Lieut.-Col. Sir Walter D.
Thorp, Linton Theodore
Wise, Alfred H.


Smith-Carington, Neville W.
Titchfield, Major the Marquess of
Young, Rt. Hon. Sir Hilton (S'v'noaks)


Smithers, Waldron
Todd, A. L. S. (Kingswinford)



Somerville, Annesley A (Windsor)
Touche, Gordon Cosmo
TELLERS FOR THE AYES —


Sotheron-Estcourt, Captain T. E.
Tryon, Rt. Hon. George Clement
Lieut.-Colonel Sir A. Lambert Ward and Mr. Womersley.


NOES.


Acland, Rt. Hon. Sir Francis Dyke
Hall, George H. (Merthyr Tydvil)
Nathan, Major H. L.


Allan, William (Stoke-on-Trent)
Hamilton, Sir R. W.(Orkney & Zetl'nd)
Owen, Major Goronwy


Aske, Sir Robert William
Harris, Sir Percy
Parkinson, John Allen


Astor, Viscountess (Plymouth, Sutton)
Hirst, George Henry
Pearson, William G.


Attlee, Clement Richard
Holdsworth, Herbert
Pickering, Ernest H.


Batey, Joseph
Jenkins, Sir William
Price, Gabriel


Bevan, Aneurin (Ebbw Vale)
Johnstone, Harcourt (S. Shields)
Rathbone, Eleanor


Briant, Frank
Jones, Henry Haydn (Merioneth)
Rea, Walter Russell


Brown, C. W. E. (Notts., Mansfield)
Jones, Morgan (Caerphilly)
Roberts, Aled (Wrexham)


Cape, Thomas
Kirkwood, David
Salter, Dr. Alfred


Cocks, Frederick Seymour
Lansbury, Rt. Hon. George
Samuel, Rt. Hon. Sir H. (Darwin)


Cove, William G.
Lawson, John James
Shaw, Captain William T. (Forfar)


Cripps, Sir Stafford
Leonard, William
Smith, Tom (Normanton)


Curry, A. C.
Logan, David Gilbert
Stewart, J. H. (Fife, E.)


Daggar, George
Lovat-Fraser, James Alexander
Stones, James


Dickie, John P.
Lunn, William
Tinker, John Joseph


Dobble, William
Mabane, William
Wellhead, Richard C.


Edwards, Charles
Macdonaid, Gordon (Ince)
Wedgwood, Rt. Hon. Josiah


Foot, Isaac (Cornwall, Bodmin)
McEntee, Valentine L.
White, Henry Graham


George, Major G. Lloyd (Pembroke)
McGovern, John
Williams, David (Swansea, East)


George, Megan A. Lloyd (Anglesea)
McKeag, William
Williams, Edward John (Ogmore)


Graham, D. M. (Lanark, Hamilton)
Maclay, Hon. Joseph Paton
Williams, Thomas (York, Don Valley)


Greenwood, Rt. Hon. Arthur
Mainwaring, William Henry
Wood, Sir Murdoch McKenzie (Banff)


Grenfell, David Rees (Glamorgan)
Mallalieu, Edward Lancelot



Griffith, F. Kingsley (Middlesbro', W.)
Mander, Geoffrey le M.
TELLERS FOR THE NOES.—


Griffiths, T. (Monmouth, Pontypool)
Maxton, James
Mr. Groves and Mr. John.


Grundy, Thomas W.
Milner, Major James

6.51 p.m.

Mr. ATTLEE: I beg to move, in line 1, to leave out Sub-seetion (1).
This Sub-section is the part of the Clause that abolishes the principle of mutuality. I was very glad just now to hear an hon. Member below the Gangway here saying how pleased he was to know that the Chancellor of the Exchequer was acting on principle, but from what followed it seemed that, while he was quite sure that the right hon. Gentleman was acting on principle, he did not know what the principle was. I have striven hard to find out on what principle the right hon. Gentleman is- proceeding, and to reconcile his reasons for acting with those put forward by the Financial Secretary to the Treasury. We are all acquainted with the principle of mutuality, and we all know that it has been established by law in the case of the cooperative societies for more than 70 years,
but the Financial Secretary to the Treasury did not seem to understand it. In his last remarks, with regard to discounts, rebates, and so on, he failed to realise that mutuality applies to the source of this money, not to the method by which it is distributed, and therefore his last argument was entirely fallacious.
I want to get at the principle on which the Chancellor of the Exchequer is acting. The right hon. Gentleman said that no one disputed the principle of mutuality in its simplest form. My hon. and learned Friend the Member for East Bristol (Sir S. Cripps) asked just now how the Financial Secretary differentiated between an unincorporated society or group of people acting together and an incorporated society, but, needless to say, he got no reply. The right hon. Gentleman the Chancellor of the Exchequer, when he first introduced this proposal,
tried to rest the principle of it on the creation of a separate corporate body. He argued at considerable length that a co-operative society was a separate body from its members, but he was entirely bowled out by my hon. and learned Friend the Member for East Bristol, and he found out that incorporation could not make the slightest difference to mutuality.
The hon. Gentleman the Financial Secretary, who has a very agile mind and is always ready to leave ground that is untenable, promptly left that ground and fell back on something quite different. He fell back on size. A principle is all very well when you apply it to a few people, but you must not apply it to many people. I was very interested in that line of reasoning. When is a principle not a principle? When you attempt to apply it on a large scale. I think the Financial Secretary had better produce a new Decalogue. "Thou shalt not steal" is all very well, but, according to the hon. Gentleman, it should be "Thou shalt not steal on a small scale." If you steal on a big scale, it is another matter, and if you take money from thousands of workers, it is not stealing. It is very wrong to murder, retail, and you will probably get hanged for it, but if only you do it on a large scale, you will go down to history possibly as the great. Thou shalt not bear false witness against thy neighbour, but if you say that the wicked Socialists will steal your Post Office savings you will be Prime Minister of a National Government.
If a few men buy a sack of potatoes, share it out, and find a bit over and share that out, that is mutuality, but when it comes to 1,000, or 2,000, or 20,000 people in a society, it is a different matter. That distinction is, of course, entirely fallacious. The Financial Secretary has tried to make out that taxable income depends not on how you get it or on its amount, but on how you intend to use it. You get money which is agreed to be the result of mutual trading and to be of the nature of a discount. If it is going to be given back to the individual, that is all right, and it is not taxable, but if it is used for a collective purpose it will be taxable, and if they are going to hold it over for a year, it is taxed. There is no principle in that whatever, and, as a matter of fact, there is only one
principle at the back of all this, and that is that vested interests and private profit must be protected.
The suggestion has been put forward by the hon. Member for South Kensington (Sir W. Davison) that all these private traders are not concerned in the least for their profits, but that their sense of justice is wounded because they are being treated differently from other folk. Everybody knows that the importance of this abolition of mutuality is not in what is actually going to be done to the cooperative societies, but in getting that principle wiped out of our law. They are franker outside than they are inside this House. Outside it has been frankly stated that the important thing is to make a beginning. Of course, an out-and-out supporter of private interests like the hon. Member for Devizes (Sir P. Hurd) never has been satisfied with this; he regards it as a first step.
The Chancellor of the Exchequer was torn two ways. He realised the strength of private interests, and he realised the strength of the co-operative societies. He tried to get round it by keeping in this particular part of the Clause—to keep mutuality and yet make the co-operative societies pay. It is political racketeering. What he did was to try to blackmail the co-operative societies. That failed. We now have this suggestion that mutuality is to go altogether. I cannot see how it is possible to draw a distinction and say that it is right not to tax money that goes back to individuals, while it is right to tax money that is kept in the society.
There is, I think, an extraordinary fallacy running through this Debate— that we tax things and not persons. All taxes are borne by people. We had just such a fallacy regarding the taxation of beer. The suggestion then made was that if people did not drink beer there would be nothing to tax. We have the same thing here. With these terrible, great co-operative businesses growing and growing, there will be nothing to tax. The idea runs through every Budget speech made from the other side— the only way the Chancellor of the Exchequer can get any money is to get someone to make profits, and then take part of them. Our financial doctor who got the mandate believes only in the leech. Private profit is the leech. It is
put on to get blood. The Chancellor of the Exchequer takes it off and squeezes it for the blood. We have the fallacy that if all retail trade were taken over there would be less taxable capacity.
It has been suggested that it is extraordinarily unfair to allow the cooperative societies to put these profits to reserve. The argument runs that where you have a private trader making £2,000 profit he has got, after taxation, only £l,500 to put aside for equipment, whereas a co-operative society, not being taxed, would be able to put £2,000 aside for Capttal development. The fallacy in that is that the private trader takes everything which, in the co-operative society, goes back to the consumer in the way of"divis."You have a private trader who sells £200 worth of goods, and makes £50 of profit. The co-operative society does precisely the same thing. The private trader will have £50 to use as income or put aside as reserve but the co-operative society will return the bulk to the consumers as dividends on purchases, and will retain only a residue. When you come to look at the point, the private trader gets more.
We claim that the right basis for taxation is the individual in accordance with his means. No co-operator objects in the slightest degree to paying his full share of taxation. He pays a very full share of indirect taxation—a higher proportion than the other. He does not object, if he comes within the limits, to paying Income Tax. The suggestion put forward is that here are a number of people outside the Income Tax limit, because their income is too low, but, because collectively they make a certain amount of profit, we should tax them. We have all this wonderful parade of figures showing that there are millions of pounds in the workers' hands. The Financial Secretary is a good disciple of the President of the Board of Trade and is so fond of parading the large sums owned by the workers. When you come to divide the amount by the number of workers, it is a very paltry sum. When you come to the amount of the property of the co-operative societies, if each member got his share, the sum would be such as a private trader would hardly regard as worth anything. We have had a suggestion of those "great, rich eo-opera-tive societies." If you got 2,000,000
paupers and gave them 5s. each, you might say it was a wonderful sum.
People should not be taxed heavily because their collective amount of property is large. That is another fallacy. When you come to look at the matter, this is not a desire to raise revenue. It is entirely out of place in the Finance Bill for that reason. The Chancellor of the Exchequer said he was not specially concerned with raising revenue. The whole basis of this Clause is to do away with the co-operative principle of mutuality, and to put it as far as possible outside the law. It is suggested that this is done in the interests of small traders. It is not the small trader who gets up this big agitation. It is the big trader. The small trader is being hit more by multiple shops than by co-operative societies, and is treated by them with far less considers tion. We have not had them come to this House to suggest that extra taxation should be put on the Home and Colonial and other stores. The multiple shops manage to delude the little man to stand in with the big men, and it is extraordinary how the gudgeons come in on the side of the whales.
We object altogether to the abolition of the principle of mutuality which was founded in common sense and is, as a matter of fact, in its individual application adopted by persons in every walk' of life in their ordinary business. If any hon. Members were to go in for any joint adventure, such as taking a shoot or anything of that kind, would they seriously tell me, that if they found they had got something over at the end of the season, that their consciences would be deeply hurt because they had been practising the infamous principle of mutuality? Would they, especially after Derby Day, go running round to the Chancellor of the Exchequer and say "We are sorry. We have been practising this principle of mutuality. We have made a profit. We do not think you can call it a trade discount, and we must hand you this money." This is adopted simply and solely because here you have a great and successful movement, and a movement that is based on the negation of the present system. The whole of the present system rests on the basis of profit for the Capttalist. Where you find a system based on mutual saving and assistance you naturally find that advocates of the present system are up against it.
As long as the co-operative societies were small and weak they could be ignored. Since they are successful we have had a threat. For the benefit of hon. Members who have not studied this, I may say that they ought to realise that the driving of the co-operative movement into politics came from the attacks of the politicians. It is a known point of prejudice against the co-operative societies that they are stated to give money to the Socialist party. The Tories are doing just the same as they did in the Taff Vale case and the Osborne judgment. For years we have been trying to get them to come into this movement. The Labour party has found their best recruiting ground has been the stupidity of the Conservative party.

7.12 p.m.

Mr. CROOM-JOHNSON: I rise for the, purpose of putting a question which I have been asked to put by the co-operative society in my own division. They are accustomed each year, out of their surplus, to set aside certain sunns of money for certain charitable purposes connected with their own members. These sums are set aside as compassionate allowances, for assistance educatioNaily to those members who happen to have bright children, whom they think should be assisted, and for certain other things. They are anxious to know whether, under this Sub-section, these sums of money will be taxable, or whether they will be allowed to be deducted on the basis that they are charitable funds set aside?

The CHAIRMAN (Sir Dennis Herbert): I ought to tell the hon. and learned Member that the point will arise on certain later Amendments.

Mr. CROOM-JOHNSON: I may put the point, because it is one which will, possibly, need consideration. I was about to say that, if the Chancellor of the Exchequer desired that I should not put it at this stage, I would be quite ready to submit it for his consideration at some more convenient time. The point of it is that certain commercial companies are permitted to deduct, under the Income Tax Acts, for Income Tax payments certain sums which they pay to charitable organisations. As to my society, I have investigated the accounts and seen these
items. They are a little anxious to know whether it is possible for them within the existing Income Tax Acts to charge the sums they so set aside as deductable expenditure in connection with the business they carry on.

7.15 p.m.

Mr. A. BEVAN: I would like to put a question to the Financial Secretary in order to make clear a point of obscurity which he left when he replied to the discussion on the new Clause. Indeed, he left two points of obscurity. He left the point which was raised by another hon. Member concerning the taxation of dividend that is paid to the non-member. We are discussing now, I understand, the principle of mutual trading which comes under Sub-section (1). I would like to ask the Financial Secretary a question on that. I can understand that the Government, in order to try to make their own case coherent and symmetrical, must say that they are going to exempt dividend from taxation, not because it is profit or an advantage arising out of mutual trading, but because it is a trade expense. It is only by regarding it as a trade expense that they are able to make some sort of justification for their case, and they use the term "trade expense" because they must—

Mr. CHAMBERLAIN: On a point of Order, is not this point one that refers to Sub-section (3)?

The CHAIRMAN: I certainly think that it would come more conveniently on Sub-section (3). It is dealt with more particularly there, but I am not sure that I can cut it out from Sub-section (1), because Sub-section (3) is merely declaratory of what is in Sub-section (1).

Mr. CHAMBERLAIN: Sub-section (3) is the provision which says that a discount, rebate, dividend or bonus shall be treated as a trade expense, whereas Sub-section (1) is the provision that taxes the reserves of co-operative societies.

The CHAIRMAN: I am not sure that I follow the right hon. Gentleman. Subsection (3) commences with the words:
It is hereby declared that in computing, for the purposes of any provision or rule mentioned in Sub-section (1) of this Section.

Mr. CHAMBERLAIN: With all respect, I am only putting this point in
order that we may conduct our Debates without any waste of time and overlapping. Surely Sub-section (3) is an entirely new point. It formed no part of the new Clause as it was origiNaily put down. It is an insertion which has been put in at a later stage to meet a particular difficulty which was represented in earlier discussions.

Mr. ATTLEE: May I point out that the Chancellor of the Exchequer told us when he introduced the new Clause without Sub-section (3) that it followed from Sub-section (1), and that it was only to make declaratory and explicit what was, as a matter of fact, implicit in Sub-section (1)?

Mr. CHAMBERLAIN: I do not wish to make any objection if you think that it is proper to discuss Sub-section (3) on the present Amendment, but I hope that we shall not discuss it again when we come to Sub-section (3).

The CHAIRMAN: As a matter of fact, there is no Amendment on the Order Paper on which Sub-section (3) will arise: Several later Amendments are not in order, with the possible exception of one which will come more conveniently on the next proposed new Clause. There is no Amendment on the Order Paper dealing with Sub-section (3). Therefore, in those circumstances, it is quite clear that anything discussed on this Amendment which could be discussed on Sub-section (3) cannot be discussed again in the Committee stage. I still feel that, up to a point at any rate, the question which the hon. Member for Ebbw Vale (Mr. A. Bevan) was raising is one which can be raised on Sub-section (1), but I must be careful to see that he does not get outside the provisions of Sub-section (1).

7.21 p.m.

Mr. A. BEVAN: I will attempt to confine myself to the points in Sub-section (1), but I was following my hon. Friend who moved the Amendment and who made a speech directed to showing that there could be no taxation of the advantages of mutual trading. If I cannot deal with the points with which I am dealing and which arise directly from the Government's own modification of that principle, it is difficult to see what one can argue under this Sub-section. The point I was putting is that the Government, in order to make their proposals
symmetrical, have found it necessary to make a distinction, which they have not yet shown to be valid, between the individual and the individual in his capacity as a member of an incorporated union. That is the whole point that is being raised at the present time. The distinction has not yet been proved, but it is a distinction which is vital to the Chancellor of the Exchequer's case. If he is unable to sustain that distinction, his whole case falls to the ground, because he has really said, "It is not our intention to tax the profits of mutual trading, but we must make a distinction between these large agglomerations of individuals and the individual co-operators." As he said in his first speech on this subject, the individual has been largely submerged in these huge agglomerations, and therefore it is possible to make a distinction between the incorporated individual and his unincorporated identity.

The CHAIRMAN: Will the hon. Gentleman point out where he considers that the difference between the incorporated and the unincorporated body arises?

Mr. BEVAN: That is the basis that the Chancellor has advanced for the tax.

The CHAIRMAN: That would be a question on the Clause. I am asking the hon. Gentleman to help me and to tell me whether the question arises at all on Sub-section (1). I do not see at present where it does.

Mr. ATTLEE: The point has already been made that we are abolishing the principle of mutuality in Sub-section (1) as respects registered societies. The point is that the principle of mutuality still remains in regard to unregistered societies or groups of individuals, so that it is in order to draw a comparison between the position of those two things.

The CHAIRMAN: I take it that the words "company or Society," to which this particular legislative provision applies, are only incorporated bodies?

Mr. ATTLEE: As defined in Subsection (7).

The CHAIRMAN: Yes.

Mr. BEVAN: It was understood by some of us when we had the Debate on the new Clause that these points could be raised on this Amendment, otherwise the
Debate on the Clause would have been considerably extended. We wished to confine the Debate on the Amendment narrowly to this question, because it is here that we see the main grievance of the Government, and it is because we wanted to have a discussion on this particular question, which is the substance of the whole case, that we let it go by default when the Clause was being discussed. I was saying that it is necessary for the Government case that they should make a distinction between the individual in his incorporated and his unincorporated capacity. Perhaps in high philosophy a case could be made out for that. As Hegel said, quantitative differences bring about qualitative changes, but the Chancellor of the Exchequer has not quoted Hegel in defence of this provision. I realise, however, that it is essential for him to sustain his argument. and perhaps I may follow it through. If you are going to retain the distinction, it follows from that that the co-operative society in its incorporated position treats the dividend it pays to its members as a trading expense. Looking at it entirely from the point of view of the entity, as such, of the incorporated union, it has to pay this dividend in order to attract members into the society so as to enlarge the extent of its trading. Consequently, it is entitled from that angle to regard it as a trading expense.
But this gets the Government into greater difficulty still, because it has been admitted by co-operators that the trading with non-members could reasonably be subject to taxation. But inasmuch as the Government must treat the payment to the individual member by his incorporated self as a trading expense, it wipes out the difference between a non-member and a member, and it obviates what was formerly a real difficulty. So, however much trade the co-operative movement carries on with non-members, the Chancellor of the Exchequer has laid it down that the dividend which is paid to non-members must escape taxation because it is a trade expense. I am sure that the private traders will look upon this as an extraordinary departure, and will not thank the Chancellor for it. In the past the co-operative societies have attached much more importance to their member-
ship trading than to their non-membership trading.

Mr. CAPORN: Would they give it up? I have asked co-operative societies and I am told "Certainly not."

Mr. BEVAN: I am endeavouring to point out that co-operative societies carry on trade with non-members, and that that trade cannot be regarded as mutual trading. That point has been admitted, and, as I understand the position, the co-operative societies have not taken a very strong opposition to the taxation of that portion of their revenues because, as a matter of fact, if they were taxed, the individual would be able to get it back, because he is usually not an Income Tax-paying individual. If he received it and if he were taxed because he made a profit with a non-member, he would then be able to claim a rebate of that from the revenue authorities because he is not an Income Tax-paying person, but, nevertheless, the distinction would be kept clear between mutual trading and non-mutual trading. But the Government, in order to support a totally unreal distinction, must treat the dividend not as a consequence of mutual trading but as a trading expense. It is a trading expense in the case of the individual member—because in the Chancellor's mind he is not now a co-operator at all; he has obliterated him as a co-operator in his individual sense, because he has distinguished between him in his individual capacity and as a member of a larger corporation.
The Chancellor has said the individual is not trading with himself, but is trading with the society. If it is ridiculous it is the Chancellor who is ridiculous, because he has said the society is a distinct and separate entity, and if a society is a distinct and separate entity, the member is no longer trading with himself in a society, but is trading with a society and the society is selling to him. The Chancellor is bound to make that absurd distinction. It is a distinction which arises inevitably out of the difference between incorporation and non-incorporation. If that is so, the Chancellor is carrying the principle into a piece of territory to which it formerly did not belong, and must treat the dividend to the non-member as a trading expense. So whatever revenue the co-operative society derives from an expansion of non-membership
trading is, the Chancellor has said, exempt from taxation—well, it is exempt in the sense that whatever the society pays out in order to obtain trading with a non-member is exempt from taxation because it is a trading expense. That is what the Chancellor has said, and in consequence of that the Chancellor has obliterated the principle of mutual trading, and has put some of his followers in a difficult position, because they are no longer able to argue in their constituencies that the reason why co-operators are taxed is because they trade with non-members. They can no longer argue that position.

The CHAIRMAN: I allowed the hon. Member to raise this point of difference between incorporated and non-incorporated societies, and I think it is in order, but on this Amendment I cannot allow him to make a speech which he has already made on the Clause.

Mr. BEVAN: I was concluding that portion of my argument, because I think my point has been made. I want to address one question to the Chancellor or whoever is going to reply. Supposing that a co-operative society decides that it will have a dividend equalisation account. Supposing it says, "We are going to make a distinction in our reserves. A certain portion of our reserves are going to be used for ironing out our dividends." For instance, suppose it has £10,000 for distribution, and it distributes £5,000 in "divi," and explains, "The reason why we are not paying out more dividend this year is that our estimates of future trade indicate that perhaps next half-year there may be a fall in the dividend, and in order to avoid that fall we are now laying aside a sum of money to reserve." Suppose they lay aside £2,500 to a dividend equalisation account, and use the other £2,500 for whatever purposes they at present use their reserves for, and they give an assurance to the Inland Revenue Department that in no circumstances will that £2,500 be used for any other purpose except to maintain the dividend at the level at which it has been fixed, or, indeed, to raise it if they so think fit. The question I put is: If a co-operative society makes a distinction of that sort in its reserves, will that portion of the reserves allotted to the dividend equalisation account be subject to taxation? It is a point of con-
siderable importance, because the point has been made in the course of this Debate that one of the difficulties about not taxing dividends but taxing reserves is that in many instances the reserves are an undistributed dividend.

Mr. CHAMBERLAIN: The point which I understand the hon. Member to be raising now appears to me to be the subject of an Amendment by the hon. and learned Member for East Bristol (Sir S. Cripps)— in line 27, at the end, to insert the words:
and where any sum which has been assessed for tax in accordance with the pro-visioins of this Section is subsequently granted by the company or society to members or other persons as a discount, rebate, dividend, or bonus within the meaning of this Sub-section, the company or society shall be entitled to a refund of any tax which may have been paid thereon"—
in which case it would come under Subsection (3). Might I inquire if it is intended to call that Amendment?

The CHAIRMAN: No, I do not propose to call it, as not being in order. I was about to say to the hon. Member that he is repeating almost word for word arguments which were used in debate on the Clause and were the subject of a reply.

Mr. BEVAN: I beg your pardon, Sir Dennis. The question I am now addressing to the Chancellor has not, in fact, been put.

The CHAIRMAN: I do not know whether the hon. Member was present, but I listened to it being put at very considerable length, and also to the reply. The whole point here is that, however much it might be in order for other reasons, I cannot admit a Debate which has taken place and been closed to be repeated.

Mr. BEVAN: The point was put by my hon. and learned Friend the Member for East Bristol (Sir S. Cripps). It was put in this form. Provided that a sum of money which has been laid to reserve is ultimately distributed in the form of dividends, will the tax which has been paid upon it be remitted? That is not the form in which I am putting the question. My question is: If the co-operative society makes a distinction in its reserves and earmarks—[Interruption.] The same point, but it makes a great difference in the behaviour of the society.
If the society-specifically lays aside a sum of money merely for dividend purposes—

The CHAIRMAN: That point was put and put very definitely, and I do hope the hon. Member, who has put it now, will not repeat the arguments that were used then. He has put his point.

Mr. BEVAN: I am entirely in your hands, Sir Dennis, but in my mind the distinction is as I have put it. The point I am making is not that the society subsequently uses as dividend a sum of money which formerly went into the general reserve and was taxed, but if at a given point they say, "We do not propose to distribute this sum at this moment, but this is future dividend and we are earmarking it as such and it will be devoted to no other purpose," will the society be allowed to make such a distinction? And if it makes that distinction in its bookkeeping will that sum of money escape taxation? I do hope that the right hon. Gentleman will not assume that his former reply is a reply to that point, because it is not. The point is fundamentally different. When we were discussing company reserves on the point of a remission of taxation on them the question was raised in that case: If those reserves which at present escape taxation are distributed as dividends will the Inland Revenue get that rebate back? The answer was that no company would so behave.

Sir JOHN WARDLAW-MILNE: In the case which the hon. Member has put, does not that, in fact, amount to setting aside money for the purposes of a dividend equalisation account?

Mr. BEVAN: That is the point I am putting. It has not been answered in the form in which I am putting it. I desire to put the question specifically, in order to have it on record specifically for future reference.

7.42 p.m.

Mr. SAMUEL SAMUEL: The argument of the hon. Member for Ebbw Vale (Mr. A. Bevan) goes to prove that cooperative societies are not what they claim to be, mutual trading societies. If they were to adopt the principle of putting profits to a fund for the purpose of equalising dividends they would not be
following out the original object of the societies. I have always understood that their object was to buy cheaply in the market and to distribute what they bought amongst their members at cost price. Now they tell us that that has nothing whatever to do with anything in the co-operative movement, but that they are out to make profits from their members or from outsiders. Therefore, I do not see where the mutuality comes in. Like any other trader, they are out to make as much profit as they possibly can. They make profits which they do not distribute and call them reserves. They say to the House, "They are undistributed profits, but we have put them to reserve, so that if we have a bad year and make a loss those profits will Come out to pay the shareholders —or whatever they are called—"the usual dividend." I always understood that their shareholders were very poor people, with only small incomes, and therefore that they would not be liable to taxation.
We are dealing here with a purely trading concern. We have a trading body with millions of members, who are making millions of pounds of profit, and putting some of that profit to reserve. They may buy a business or open a new business, and whatever they lose on that business they may take out of the reserves which are at their disposal; but at the same time they are saying that those reserves are held for the purpose of paying dividends to the shareholders or the members of the organisation. These concerns which have grown to an extraordinary size have done so simply by keeping their profits instead of distributing them. A society establishes a new branch and does not make up its books in a way to allow of detection as to what becomes of their surpluses. They do not put down, like any trading concern or private company, how they are using their money, and we are apt to find out that the expense was debited to accounts which had no right to be used for the purpose. If co-operative societies buy the lease of a house, they generally put that to Capttal expenditure and, whatever they make in other ways, the particular branch takes the money out of the profits of the whole concern. Those profits are used in that way, and co-operative societies have never for years and years raised further Capttal, so far as my recollection goes. They
make these gigantic profits and they utilise them to write off the cost of a business or the foundation of a business, which the ordinary trader would not be allowed to charge as a working expense.
The speeches which have been made in this Debate show perfectly well that enormous profits are made, and that, instead of being called profits, they are hidden away in secret reserves. I have no hesitation in saying that, if you were to examine the books of co-operative societies, you would find that those immense sums do not appear in them. They are simply written off in some way or another. You cannot get over the fact that these organisations are trading concerns. They have put away profits which ought to have gone into their proper accounts, and if they come within the scope of the Income Tax, as I hope they will, the Chancellor of the Exchequer will find an enormous fund from which to draw for revenue, and he will prevent the use of the money for many purposes which are quite illegitimate and are outside the scope of the objects of co-operative societies. In regard to mutuality, I recall that, not long ago, a co-operative society bought a large rope factory to make ships' hawsers and that sort of thing, and they put in tenders to the Hull Corporation Docks for all sorts of hawsers and different things.

The CHAIRMAN: The hon. Member is now getting on to a debate upon the main principles of the Clause. I know that this Amendment opens the way to a good deal of latitude, but I am afraid that the hon. Member is getting far beyond the question of Sub-section (1).

Mr. SAMUEL,: I do not want to dwell upon that, but hon. Members of the Opposition have pointed out the way in which the principle of mutuality operates, and I was saying that the co-operative societies are carrying on business in the same way as a private trader. They cannot claim that they do not make profits and at the same time place them to reserve.

7.50 p.m.

Mr. CHAMBERLAIN: I do not propose to repeat the arguments which I used on the general Debate. I rather fancy that the hon. Member for Limehouse (Mr. Attlee) was not present at that time, or he would have known that many of the
points had been already made and had been answered. I rise to answer two specific questions that have been put to me. One of them was put by my hon. and learned Friend the Member for Bridgwater (Mr. Croom-Johnson) about the case in which subscriptions are made by a co-operative society. The answer there is that a society that gives to a hospital is in just the same position as a private company. The hon. and learned Gentleman is aware that they are allowed to deduct subscriptions to a hospital as trading expenses, provided that the need for them on behalf of their employes is sufficiently established to justify them. A co-operative society would, in the same way, be able to deduct a subscription. The other specific question was whether, if a society put aside part of its surplus to make a special dividend equalisation reserve fund, that fund would be exempt from taxation. The answer to that is in the negative.

7.52 p.m.

Mr. McENTEE: I do not think that the answer which (has just been given by the Chancellor of the Exchequer will be satisfactory, even among his own followers. From his earlier speech, I understood that it was the intention of the Government that that part of co-operative reserves which is used for the purpose of dividend was not liable to tax. We have just heard, in reply to a specific question, something that appears to be a flat contradiction of the Chancellor's earlier statement. Suppose that money is held back from January, at which time ordinary dividends would be paid, specifically for the payment of dividends in the following January, and, as a consequence of that reserve for dividends, there is an increase in the amount to be paid in the second January. Surely that sum is specifically for dividend purposes. The Government intend definitely to tax the dividends of co-operators. There is no other meaning to the words which we have just heard from the right hon. Gentleman. I hope that co-operators will take the trouble to read the answer that has just been given by the Chancellor, so that they will know that it is definitely the purpose of the Government to tax the dividends of co-operators. The statement of the Chancellor that it will not be possible in future for any part of a reserve which is left over on a specific day, after the payment of dividend, to be
definitely earmarked for future dividend, means that the fund for dividend is to be taxed. It can mean nothing else than that. I hope the co-operators will pay special attention to that answer, and that they will understand that the Chancellor's earlier statement did not mean what he intended co-operators to think that it meant. We are discussing the question of mutuality in co-operative societies.

The CHAIRMAN: The hon. Member will allow me to say that that is subject, as I said a few moments ago, to this, that I cannot allow a general repetition of the Debate which took place on the Clause as a whole.

Mr. McENTEE.: I agree, Sir Dennis. The question of mutuality has been discussed by other speakers, and I do not intend to repeat the arguments that have been put forward. I listened with interest to what was said by the hon. Member for Putney (Mr. S. Samuel). He made a reference to the extension of co-operative business by the purchase, or on some occasions the building, of new premises for the extension of business. As a co-operator who has been a member of the co-operative movement for a large number of years, I have given part of my money for the purposes of extension and the opening of new premises. I did it with the specific purpose, as no doubt every other co-operator in the country does, of enabling the society to get new members, because if new members are obtained we can extend our society.
We may see, after a time, that there are a considerable number of people in an area where there has been no cooperative society, and we decide to open new premises there. We look round for a site, or for an existing business or shop, and we either buy that business out or we build new premises and start trading. I ask the Financial Secretary to the Treasury whether money expended in that way is not a business expense for the purpose of expanding the business of the co-operative society and increasing its membership; whether, in accordance with the statement which the Chancellor has made, it is exempt from taxation as a business expense, and whether reserves which are used in that way can be treated in any other way than as a business expense. If new premises are opened and
new staff employed, in order to extend the business of a society, surely that is business expense.
I would like to know how it is possible to distinguish between the amount that is expended in that way from any other business expense, and to say that one part of money from the reserve, used for certain purposes, is taxable, and that another part is not taxable because it is called business expense. I will put another point to him in regard to grants made for educational and other purposes. I am interested in a number of donations for educational purposes made by cooperative societies, including the society to which I belong. When I vote money at a meeting which I attend—every member of a co-operative society has a right to attend for the purpose of holding educational classes or meetings. I would like to know whether that is not a legitimate means of spending my own money for my own purposes, and why that money, which is a part of my dividend to which I am entitled and which I think I could claim, should be taxed.

The CHAIRMAN: I think it is only fair to hon. Members on the Opposition benches to point out that, if this discussion goes on, I cannot allow the discussion to be repeated on the Amendments which have been put on the Order Paper with the express object of dealing with these points.

Mr. McENTEE: I agree, and I was under the impression that that was what you were going to say. I am glad to hear that it is so, but I am following an hon. Gentleman who put specific questions to the Chancellor of the Exchequer on these very points.

The CHAIRMAN: If the hon. Member was here at the time, he will know that I called the attention of the hon. and learned Member for Bridgwater (Mr. Croom-Johnson) to that express point, and he did not pursue it. The Chancellor of the Exchequer made a brief reply on the point, but, if the matter is to be discussed and arguments are to be urged one way or the other with regard to the application of the money for educational purposes and so on, I cannot allow a discussion on the other Amendments which deal with those points.

Mr. McENTEE: I accept your Ruling, and, indeed, I am rather glad that it
has been given, because I was afraid that, in view of the Chancellor's brief reply to the hon. and learned Member for Bridgwater, we might, when we came to those Amendments, find that we were not able to discuss them, because we should be told, as we have been told already by him, and an effort was made by him to induce you to give a Ruling to that effect, that we could not discuss some of these matters. I was afraid that the Chancellor of the Exchequer, by something which I am rather inclined to describe as sharp practice, might try to prevent us from discussing these matters later. As we shall be able to discuss them, I do not desire to pursue the point further, but, if possible, I will take an opportunity of doing so later on.

8.3 p.m.

Mr. LAWSON: I should not have risen but for the last few words of the Chancellor's answer to the questions which were put to him. It will be remembered that last week I moved an Amendment dealing with the Equalisation Fund, proposing to insert the words:
(other than any moneys set aside for return to members as dividend or discount on their purchases)."—[OFFICIAL REPORT, 24th May, 1933; col. 1223, Vol. 278.]
During the discussion on that Amendment, it was emphasised that the desire was to safeguard any funds earmarked for dividends and not paid this quarter, but perhaps paid next quarter. The reply of the Financial Secretary was sympathetic. The House was fairly full at the time, and I think there was a great sigh of relief from the supporters of the Government, who felt that otherwise many of them would have been forced to go into the Lobby against the Government. The Chancellor of the Exchequer said:
With regard to the particular Amendment before the House, its wording is not sufficiently accurate or precise to enable me to accept* it, but, if the hon. Member will withdraw his Amendment now, I will certainly undertake to look into the question which he has raised before the Clause is actually debated. If it is found possible to put into the Clause some sort of assurance that will remove such doubts as may arise in the minds of co-operators, I shall certainly do so."—[OFFICIAL REPORT, 24th May, 1933; cols. 1230–1, Vol. 278.]
On that statement I withdrew the Amendment. I put it to any Member of the Committee who was in the House at the time that there was a general under-
standing that the Chancellor of the Exchequer, somehow or other, was going to safeguard from taxation what we call the earmarked funds, which are, perhaps, not paid out this quarter, but would be paid out in some other quarter. The right hon. Gentleman, however, at the end of his statement just now in answer to the questions put to him, said that the answer on this point was in the negative. I was very much surprised to hear that very definite statement, and those who were in the House last Wednesday night, and were relieved when I withdrew my Amendment, must be very much surprised at the present attitude of the Chancellor of the Exchequer on this question. It appears now that he will not do what I, at least, and I think my hon. Friends, then understood would be done. I would ask the Financial Secretary how he can explain this matter away, because he must know that there was a fairly clear understanding—[HON.MEMBERS: "No!"] There may be disagreement as to what the right hon. Gentleman intended to do, but that he gave us the impression that he intended to do as I have said is, I think, unchallengeable.

8.9 p.m.

Mr. EDWARD WILLIAMS: The hon. Member for Putney (Mr. S. Samuel) inferred that the accounts of the co-operative societies were not kept in a straightforward manner, that they were hiding some of their operations, and that there was no great difference between the cooperative movement and any other trading concern. It may have been stated in the House before, but I think that, for the benefit of the hon. Member, I am entitled to quote some advice which was given by the Foreign Secretary when he was consulted by the Co-operative Union some time ago, on the occasion of an attempt to impose Corporation Profits Tax upon the undistributed portion of the mutual surpluses of co-operative societies. In the course of his opinion he said:
It is clear that the whole of the 'balance' is nothing more than money provided by the members in excess of what, as it turns out, was actually required for the purchase of the goods and the expenses of such purchase; and there is in principle no difference whatever between that part of the balance which is handed back to the members as not being required and those parts which, with their consent,
are used for purposes which are incidental to the operations of the society over and above the mere purchase of the goods which are to be distributed. None of this money can possibly be called a profit, either of the society or of its individual members.…It may be urged with great force that, whatever the technical legal position may be, a society's surplus is in no real sense a profit, either to the society or its members, and that there is no rational ground for imposing the tax even on that part of the surplus which the society retains for making necessary payments or for reserve.
The Foreign Secretary, as a lawyer, is regarded as a person of eminence—

Mr. S. SAMUEL: Had those books been submitted to independent auditors?

Mr. WILLIAMS: Yes; I have to presume that counsel of such eminence would not have given this advice unless all the facts had been placed before him. Naturally, such legal advice would be countered by other eminent legal gentlemen, but all the facts would have been adduced before such advice was given, and really it is too much for hon. Members to impute to the societies motives which are not legal and which are ulterior, when, prior to the incorporation of this Clause in the Finance Bill, there was no reason why they should endeavour to avoid taxation at all. They were meeting their legitimate obligations; they were paying under Schedules A and B; and, while 95 per cent. of their members were not within the Income Tax limit, and, therefore, were

not paying Income Tax, the other 5 per cent. were paying tax on their income. The object of this proposal is to make them pay at the source, and these individuals are in such a helpless position that they cannot recover what has been illegitimately taken from them. That is our objection to the whole thing. The Government are pressing it in this manner because they know that these defenceless people, who have been able to meet all their legal obligations in the past, will not be able in the future to make a reclaim through the societies. The opinion given by the Foreign Secretary ought certainly to have some weight. We should like to know whether he has changed his views in this regard, and whether the Government on this matter have consulted one of the leading Cabinet Ministers, who, I presume, is to a large extent their legal adviser. Surely the statement made by the hon. Member for Putney should not go unchallenged. All the accounts have been laid before eminent accountants for proper examination, certificates have been issued which are known to the whole world, and it should not be imputed by anyone in the House that something has been done to avoid legitimate payments, whether of Income Tax or otherwise.

Question put, "That the words proposed to be left out, to the word of in line 1, stand part of the proposed Clause."

The Committee divided: Ayes, 203; Noes, 63.

Division No. 213.]
AYES.
18.14 p.m.


Adams, Samuel Vyvyan T. (Leeds, W.)
Cadogan, Hon. Edward
Dugdale, Captain Thomas Lionel


Albery, Irving James
Campbell, Edward Taswell (Bromley)
Duncan, James A. L. (Kensington, N.)


Allen, Lt.-Col. J. Sandeman (B'k'nh'd.)
Campbell, Vice-Admiral G. (Burnley)
Elliston, Captain George Sampson


Applin, Lieut.-Col. Reginald V. K.
Campbell-Johnston, Malcolm
Elmley, Viscount


Bailey, Eric Alfred George
Caporn, Arthur Cecil
Emmott, Charles E. G. C.


Baldwin, Rt. Hon. Stanley
Cassels, James Dale
Erskine, Lord (Weston-super-Mare)


Baldwin-Webb, Colonel J.
Cautley, Sir Henry S.
Erskine-Boist, Capt. C. C. (Blackpool)


Balniel, Lord
Cayzer, Maj. Sir H. R. (Prtsmth., S.)
Evans, Capt. Arthur (Cardiff, S.)


Banks, Sir Reginald Mitchell
Chamberlain, Rt. Hon. N. (Edgbaston)
Everard, W. Lindsay


Barclay-Harvey, C. M.
Clarke, Frank
Fielden, Edward Brocklehurst


Beaumont, Hon. R.E.B. (Portsm'th.C.)
Cobb, Sir Cyril
Fremantie, Sir Francis


Belt. Sir Alfred L.
Colf ox, Major William Philip
Galbraith, James Francis Wallace


Birchall, Major Sir John Dearman
Colville, Lieut.-Colonel J.
Gibson, Charles Granville


Bowyer, Capt. Sir George E. W.
Conant, R. J. E.
Glossop, C. W. H.


Braithwaite, Ma]. A. N. (Yorks, E. R.)
Courthope, Colonel Sir George L.
Gluckstein. Louis Halle


Braithwaite, J. G. (Hillsborough)
Craddock, Sir Reginald Henry
Goff, Sir Park


Brass, Captain Sir William
Croft, Brigadler. General Sir H.
Goldie, Noel B.


Briscoe, Capt. Richard George
Crooke, J. Smedley
Goodman, Colonel Albert W.


Broadbent, Colonel John
Croom-Johnson, R. P.
Gower, Sir Robert


Brown, Col. D. C. (N'th'I'd. Hexham)
Cruddas, Lieut.-Colonel Bernard
Grattan-Doyle, Sir Nicholas


Brown, Ernest (Leith)
Culverwell, Cyril Tom
Gretton, Colonel Rt. Hon. John


Brown, Brig.-Gen.H.C.(Berks.,Newb'y)
Dalkeith, Earl of
Gritten, W. G. Howard


Browne, Captain A. C.
Davies, Maj. Geo. F.(Someset,Yeovil)
Guinnesa, Thomas L. E. B.


Buchan-Hepburn, p. G. T.
Davison, Sir William Henry
Gunston, Captain D. W.


Burghley, Lord
Denman, Hon. R. D.
Hamilton, sir George (Ilford)


Burnett, John George
Drewe, Cedric
Hanley. Dennis A.


Hannon, Patrick Joseph Henry
Mitchell, Sir W. Lane (Streatham)
Smiles, Lieut.-Col. Sir Walter O.


Harbord, Arthur
Molson, A, Hugh Elsdale
Smith, R. W. (Ab'rd'n & Kinc'dine, C.)


Harvey, George (Lambeth,Kenningt'n)
Monsell, Rt. Hon. Sir B. Eyres
Smith-Carington, Neville W.


Haslam, Henry (Horncastle)
Munro, Patrick
Somervell, Donald Bradley


Haslam, Sir John (Bolton)
Murray-Phillpson, Hylton Raiph
Somerville, Annesley A. (Windsor)


Headlam, Lieut.-Col. Cuthbert M.
Nail-Cain, Hon. Ronald
Sotheron-Estcourt, Captain T. E.


Heilgers, Captain F. F. A.
Nation, Brigadier-General J. J. H.
Southby, Commander Archibald R. J.


Hepworth, Joseph
North, Edward T.
spens, William Patrick


Hills, Major Rt. Hon. John Waller
Nunn, William
Stanley, Hon. O. F. G. (Westmorland)


Hore-Belisha, Leslie
O'Connor, Terence James
Steel-Maitland, Rt. Hon. Sir Arthur


Hornby, Frank
O'Donovan, Dr. William James
Stevenson, James


Howard, Tom Forrest
O'Neill, Rt. Hon. Sir Hugh
Strauss, Edward A.


Hudson, Capt. A. U. M. (Hackney. N.)
Penny, Sir George
Strickland, Captain W. F.


Hudson, Robert Spear (Southport)
Petherick, M.
Summersby, Charles H.


Hunter, Capt. M. J. (Brigg)
Pike, Cecil F.
Tate, Mavis Constance


Iveagh, Countess of
Potter, John
Thompson, Luke


Jackson, Sir Henry (Wandsworth, C.)
Raikes, Henry V. A. M.
Thorp, Linton Theodore


Jamieson, Douglas
Ramsay, Alexander (W. Bromwich)
Titchfield, Major the Marquess of


Jesson, Major Thomas E.
Ramsbotham, Herwald
Todd, A. L. S. (Kingswinford)


Jones, Lewis (Swansea, West)
Ramsden, Sir Eugene
Touche, Gordon Cosmo


Ker, J. Campbell
Rankin, Robert
Tryon, Rt. Hon. George Clement


Kimball, Lawrence
Reed, Arthur C. (Exeter)
Vaughan-Morgan, Sir Kenyon


Lamb, Sir Joseph Quinton
Reid. David D. (County Down;
Ward, Lt.-Col. Sir A. L. (Hull)


Law, Richard K. (Hun, S.W.)
Remer, John R.
Ward, Sarah Adelaide (Cannock)


Lennox-Boyd, A. T.
Rentoul, Sir Gervals S.
Wardlaw-Milne, Sir John S.


Levy, Thomas
Rhys, Hon. Charles Arthur U.
Warrender, Sir Victor A. G.


Liddall, Walter S.
Roberts, Sir Samuel (Ecclesall)
Waterhouse, Captain Charles


Lindsay, Noel Ker
Rosbotham, Sir Samuel
Weils, Sydney Richard


Lockwood, John C. (Hackney, C.)
Ross Taylor, Walter (Woodbridge)
Whiteside, Borras Noel H.


Lyons, Abraham Montagu
Runge, Norah Cecil
Whyte, Jardine Bell


MacAndrew, Lieut.-Col. C. G.(Partick)
Rutherford, John (Edmonton)
Williams, Herbert G. (Croydon, S.)


MacAndrew. Capt. J. O. (Ayr)
Rutherford, Sir John Hugo (Liverp'l)
Wills, Wilfrid D.


McLean, Major Sir Alan
Salmon, Sir Isidore
Wilson, Clyde T. (West Toxteth)


McLean, Dr. W H. (Tradeston)
Salt, Edward W.
Wilson, G. H. A. (Cambridge U.)


Macquisten, Frederick Alexander
Samuel, Sir Arthur Michael (F'nham)
Windsor-Clive, Lieut.-Colonel George


Maitland, Adam
Samuel, Samuel (W'dsworth, Putney)
Wise, Alfred R.


Makins, Brigadier-General Ernest
Sandeman, Sir A. N. Stewart
Withers, Sir John James


Manningham-Buller, Lt.-Col. Sir M.
Sanderson, Sir Frank Barnard
Womersley, Walter James


Margesson, Capt. Rt. Hon. H. D. R.
Scone, Lord
Young, Rt. Hon. Sir Hilton (S'v'noaks)


Mayhew, Lieut.-Colonel John
Shaw, Helen B. (Lanark, Bothwell)



Mailer, Richard James
Shepperson, Sir Ernest W.
TELLERS FOR THE AYES —


Mills, Major J. D. (New Forest)
Skelton, Archibald Noel
Sir Frederick Thomson and Dr.


Mitchell, Harold P. (Br'trd & Chisw'k)
Slater, John
Morris-Jones.


NOES.


Acland, Rt. Hon. Sir Francis Dyke
Grundy, Thomas W.
Mander, Geoffrey le M.


Aske, Sir Robert William
Hall, George H. (Merthyr Tydvil)
Maxton, James


Attlee, Clement Richard
Hamilton, Sir R. W.(Orkney A Zetl'nd)
M liner, Major James


Batey, Joseph
Hirst, George Henry
Nathan, Major H. L.


Bevan, Aneurin (Ebbw Vale)
Holdsworth, Herbert
Owen, Major Goronwy


Brown, C. W. E. (Notts., Mansfield)
Janner, Barnett
Parkinson, John Allen


Cape, Thomas
Jenkins, Sir William
Pickford, Hon. Mary Ada


Cocks, Frederick Seymour
John, William
Price, Gabriel


Cove, William G.
Johnstone, Harcourt (S. Shields)
Rea, Walter Russell


Cripps, Sir Stafford
Jones, Henry Haydn (Merioneth)
Roberts, Aled (Wrexham)


Curry, A. C.
Jones, Morgan (Caerphilly)
Salter, Or. Alfred


Daggar, George
Kirkwood, David
Smith, Tom (Normanton)


Dobbie, William
Lansbury, Rt. Hon. George
Tinker, John Joseph


Edwards, Charles
Lawson, John James
Wallhead, Richard C.


Foot, Isaac (Cornwall, Bodmin)
Leonard, William
White, Henry Graham


George, Major G. Lloyd (Pembroke)
Logan, David Gilbert
Williams, David (Swansea, East)


George, Megan A. Lloyd (Anglesea)
Lovat-Fraser, James Alexander
Williams, Edward John (Ogmore)


Greenwood, Rt. Hon. Arthur
Lunn, William
Williams, Thomas (York, Don Valley)


Grenfell, David Rees (Glamorgan)
McEntee, Valentine L.
Wood, Sir Murdoch McKenzie (Banff)


Griffith, F. Kingsley(Middlesbro',W).
McGovern, John



Griffiths, T. (Monmouth, Pontypool)
Mainwaring, William Henry
TELLERS FOR THE NOES. -


Groves, Thomas E.
Mallalieu, Edward Lancelot
Mr. G. Macdonald and Mr. D.Graham.

8.22 p.m.

Sir FRANCIS ACLANO: I beg to move, in line 1, after the word "society," to insert the words:
having in any year a trading turnover exceeding five hundred pounds.
I speak on behalf of allotment societies which are making taxable profits or gains within the meaning of the Clause and thereby bringing themselves under its
operation. Societies of that kind are distributed all over the country. They do not make much fuss or show, but many more members have them in their constituencies than are aware of it. After a visit to the Revenue Office, where the officials were extraordinarily courteous to me in explaining how they are to be taxed, it is clear that they will be taxed on the interest on their investments—of that I have no complaint to make—but
also on the profits that they carry forward from one year to another. When one talks about allotment societies, it is usually assumed that one is talking about something that is of very great assistance nowadays to the unemployed, but I do not want to put this too high.
The societies that I am speaking about are not specifically societies composed of unemployed men. There are such societies but they do not normally trade. They get their supplies through a fund known as the Friends Fund and they put up their contributions to it, but they are not the societies that are hit. The societies that are hit, of course, contain nearly always a very large number of unemployed members, and the employed men help the unemployed with most excellent comradeship. The unemployed men are very considerably concerned, although they do not do their own particular trading in that way, with the success of the societies to which they belong in this matter of trading, because it is the custom of these societies to use their profits it may be to lower the rents which they charge to all their members alike, employed and unemployed, or it may be to repair their fences or put in a water supply or to make a communal hut for the use of their members, and all these things help the unemployed just as much as the employed members. It is a thing which, above all others, we ought to try nowadays to do in order to bring a little more interest and feeling of citizenship into the lives of unemployed men up and down the country.
What normally happens which gives rise to the turnover, and then to the profit, and fiNaily, if the Clause is not amended, to the tax on the profit? You have a society of about 300 or 400 members which buys its seed potatoes in bulk from Scotland. It may buy 10 or 15 tons in order to distribute them among its members. It may sell them at a profit of 3s. or 4s. a cwt. in one year, but very likely, if the price goes against it after it has made its contracts, it will have a loss of, 2s. or 3s. a cwt. in the following year. The society has, therefore, to carry over profits in one year against losses in another, if it is to carry on upon a businesslike basis. That is the sort of thing which happens. Most of these societies are small affairs with 100, 200, 300 or 400
members; more of them are nearer the smaller figures than the larger ones. Hon. Members may derive from that fact the argument, that as the amounts are small the profits are small, and, therefore, the tax will be small and people will not mind paying the tax. That is true up to a certain point, but, if I admit it, I would claim that the argument goes a little further. If the amounts are so small as is suggested by the smaliness of the societies, the amounts ought not to be worth the trouble of specific assessment and collection. There must be a point at which that is true, but whether my Amendment meets that point, or whether it is in the best form, I do not know. I put it down as the only way which occurred to me of bringing forward the point.
If the Chancellor of the Exchequer cannot do it to the extent I suggest, that is, in respect of societies with a trading turnover of £500, will he accept any other figure which he may consider to be more reasonable? My point is, that when it comes to a fairly small amount, an average trading profit of, say, £20 per year, the bother of assessment and collection is considerable. The assessment and collection of sums of, say, only £3 or £4 a year ceases to be worth while and tends to become more vexatious to the people who are taxed than it is profitable to the Chancellor of the Exchequer. When you have a set of working men who have had the good sense to order their seed potatoes in that way, or to get their seeds in bulk wholesale, who are desperately keen on every £ they can make for the benefit of their society because they are saving up for a water supply, or hut, or something of the kind, I assure the Financial Secretary to the Treasury that even a tax of £2 or £3 out of a carry-over of £10 or £12 makes a difference, while it will not help the Chancellor of the Exchequer. It will be a hardship and a grievance upon a set of people who are not only helping themselves in these difficult times, but are doing extraordinary practical work in helping the unemployed. I ask the Committee whether it is worth it? Is it not possible to find some way of relieving these small bodies of men from the obligation of tax?
The Government are now coming to those of us who are trying to take charge of the allotment movement and urging
us to try to extend the help which we give to the unemployed from 100,000, whom we help this season, to 200,000 or so next season. I have to go in a fortnight s time to the annual conference at Southport and ask these men to put their shoulders to the wheel more than ever before in order to help the unemployed, to bring them into their societies and to find land for them. If it is the desire of the Government that I should do that, am I, at the same time, to tell them that those small profits which mean so much to them and nothing to the Chancellor of the Exchequer are to be taxed under this new proposal? That is really what it comes to. The Financial Secretary distinguished between societies on the question of mutuality according to their size, bulk and extent. There is no question about the extent of these societies. They are not large bodies of people or huge agglomerations doing the whole of their trade in an elaborate way and comparing with the big organisations of retailers. They are very small special purpose people who are hardly worth taxing but who are doing good national work. Even if the Financial Secretary is not able to accept my Amendment—I realise that I cannot possibly put it in the right form; I had to take a shot at it to bring the matter forward—I hope that he will not say an absolute "No," but that he will be able to suggest words on Report which will meet the point I have raised.

8.32 p.m.

Mr. HORE-BELISHA: Knowing the interest which my right hon. Friend takes in these matters as President of the National Allotment Society, I went to the pains of having an analysis made of all the kinds of societies in which he is interested in order to see exactly how they would be affected. I observe, incidentally, that it is not only allotment societies, which my right hon. Friend serves so well, which are mentioned in the Amendment, but all societies not having a turnover of more than £500. He does not seriously advocate that part of his Amendment literally because there is necessarily no relation between profits and turnover. One society, or one company or one man may have a turnover of £100 on which is made a profit of 15 per cent., and another on the same turnover may make no profit at all, and therefore the turnover could not possibly be accepted as a guide.

Mr. LOGAN: That is what the right hon. Gentleman asks in the Amendment.

Mr. HORE-BELISHA: I agree, but he does not seriously, I am sure, advocate) that the principle of turnover should be- applied as the basis of tax. If he moves his Amendment, it is for the purpose of obtaining some statement upon the allot ment societies which he may Commns nicate to those who belong to them. There are four kinds of societies. There is the land renting Society which derives its profit by charging the sub-tenants a larger rent than the rent which the society itself pays for the land. These societies are already charged under Schedule A, and remain unaffected by the present pro POSALS. The same applies to land-owning societies. As regards horticultural societies which hold exhibitions, they are exempt by Section 23 of the Finance Act, 1924, on
any profits or gains arising …from ah exhibition or show held for the purposes of the society, if they are applied solely to the: purposes of the society.
There remains, therefore, only the question of the income derived from investments. My right hon. Friend said that he put up no case for exempting the societies from Income Tax upon their in vestments but only from their profits upon trading transactions. It is on that last small point that my right hon. Friend feels concern. In so far as they make a profit I am afraid that we can give him no under-r taking that that profit will be exempt-We are placing all co-operative societies, whether they be allotment societies or any other, on the same footing as trading companies. If they are incorporated and if they make a profit from trading, that profit will he assessable to tax, but the most microscopical investigation of the concerns in which my right hon, Friend is interested shows that the additional liability in any event that will fall upon these societies will be minute. I do not think he need have any concern on that score. He realises that they already-pay tax under Schedule A. As regards their investments, he puts up no case at all, and in so far as they make a profit, which profit is in fact infinitesimal, they will pay an infinitesimal portion of the tax.

Sir F. ACLAND: Not necessarily in-finitesimal.

Mr. HORE-BELISHA: I agree, not in some cases, but we have made an analysis of the position and we cannot exempt allotment societies and put them on an entirely different footing from other societies, nor can we exempt societies on the basis of turnover, but my right hon. Friend may give the assurance to those who are interested in this matter that in any event the burden cast upon them will be very small indeed. I am sorry that I cannot give my right hon. Friend any other satisfaction.

8.38 p.m.

Mr. McENTEE: I regret very much the decision announced by the Financial Secretary. There are many hundreds of these societies not only in rural areas but in areas such as the one that I represent and in practically every area in and around big towns. It appears to me that the policy of the Chancellor of the Exchequer and the Government in these small financial matters is the policy of the Irishman who had a donkey. They take very little but they continue to take infinitesimal bits. They may be infinitesimal from the point of view of the Chancellor of the Exchequer or from the point of view of any Member of this House, but to the unemployed man who perhaps has 15s. 3d. a week, even the taking of that 3d. may make a big difference to him. I had hoped that the Government would accept the Amendment. Allotment holders all over the country, employed and unemployed, are almost entirely very poor men. In some cases very poor women are allotment holders. They cultivate their allotments, which represent to them a great percentage of their actual living from week to week.
The Financial Secretary has described their surplus as a profit. Is it a profit? A number of men may come together for the purpose of cultivating their allotments and they find that if they purchase one spade or fork it will cost them 5s., but that if they purchase them by the dozen, the score or the hundred they can get them at a very much smaller price. Why should they be taxed because they purchase the articles that they require on their allotments at a cheaper price than they would be able to do if 100 different people made the purchases? Why should the saving that they make on those transactions be taxed? I felt
amazed at the ease with which the Financial Secretary dismissed the matter. I can imagine allotment holders holding meetings to consider this matter, and I feel sure that the Allotment Holders' Association will not take it quite so easily as the Financial Secretary seems to imagine. If they buy seed potatoes for their allotments and buy sufficient to supply 100 persons, instead of those 100 persons each going and buying a stone, they ought not to be taxed on that. It would be impossible to carry on any kind of association unless they had a reserve to carry over from one year to another. I hope that even now the Financial Secretary will bring before the Chancellor of the Exchequer the injustice that is being done to many hundreds of thousands of very poor people and that he will ask that this small concession should be granted. I would like to see the whole of the co-operative tax dropped, but if I cannot get it dropped in regard to the society of which I am a member I see no reason why I should desire to inflict this injustice on people in other kinds of co-operative societies who are carrying on another kind of mutual aid, and who are very much poorer than I am.

8.43 p.m.

Mr. CR00M-J0HNS0N: I, too, very much regret the decision which has been announced. I do not propose to travel over the ground which has been so ably covered by the right hon. Member for North Cornwall (Sir F. Acland), but I would suggest a practical consideration to the Financial Secretary. This tax is going to cause a considerable amount of trouble and difficulty and probably some expense in the mere getting out of the returns by the allotment societies, in order that they may ultimately be assessed. The amount of money, we are told, is infinitesimal. We have that assurance from the Financial Secretary. The amount of the charge, presumably, is going to be infinitesimal in respect of many of these societies. Does the hon. Member mean to say that the resultant expense to the societies, the expense to the officers and the taxing authorities, the difficulties of dealing with the accounts, and the amount of public time that will be involved, will really be paid for by the amount of tax that is going to be recovered under these proposals? I do not wish to use any harsh
expression. The Government are trying to balance their Budget, but I must confess that it never occurred to me that one of the methods of balancing the Budget would have to be to take what are, after all, mean sums of money from a collection of people who are doing most admirable work, and whose work is being sought to be extended in every direction, and that in order to do that you are, at what I cannot help thinking will be large public expenditure, taking tiny sums of money from people who I am sure have the sympathy of all parties in the House.

8.45 p.m.

Sir WILFRID SUGDEN: I want to add my voice to those which have pleaded to the Financial Secretary to reconsider this matter, but I want to make my appeal to him from another point of view. In my constituency I have the finest group of allotment holders in the country. [HON. MEMBEES: "No!"] No other constituency can compare with mine. They are mainly men who are engaged in industry, engine drivers, stokers, labourers in various kinds of industry, who have gone on to the land in order to get a breath of fresh air. Whatever the Treasury may obtain as a result of this taxation—and I agree that it is contemptuous and mean—it will be more than spent in respect of the health services which will be necessary on the part of another Government Department. What is saved on the swings will be more than lost on the roundabouts.
I want to ask the Financial Secretary with his logical mind to get away from the point of view of the specialist. I happen to be a member of a profession which has specialised departments, and if a client comes to one in that profession seeking for a remedy for a certain ill the specialist sometimes is inclined mainly to look upon the complaint from his own particular standpoint alone. The Treasury is looking at this matter from the standpoint of the revenue, very small return though it is, which may be obtained, instead of taking a broad and more helpful view as to what is for the good of the body politic. It may be that the Financial Secretary may march into the Treasury next year with £17 3s. 4d. as the result of this gigantic and magnificent allotment holders tax, but if he has to spend £1,723 in curing my engine drivers, my stokers and my industrial workers
who are at present enjoying good health and keeping in good health as a result of their allotments it will not be for the good of the nation. It is a policy of penny wise and pound foolish, and I hope the Government will agree at once to give this small concession, which is demanded in justice and equity.

8.48 p.m.

Mr. LOG AN: I am surprised that any Minister holding a responsible position on the Front Bench is not able to rise to the occasion on such an Amendment as this. In the name of common sense what is the Treasury going to get out of allotment holders? I know many of them in the city of Liverpool, and what they get out of the ground is simply helping to keep them alive. I cannot see that any of these places will ever become great trading concerns. Even if they do save a few pounds by means of mutual trading, surely this great nation, in its Finance Bill, is not going to be saved by the taxation of small allotment holders! Nothing more ridiculous could be imagined than that the Minister in charge of the nation's finances should come down to pickled cabbage and potatoes; the next thing will be parings. There may be a national calamity. There is a national calamity as far as the Government are concerned; the whole thing is a national calamity when it is necessary to come down to such small things. If a dozen men do join together in order to buy their equipment, why should they be taxed? I have sold pickaxes and spades, and I know that if a man came and bought one we should probably charge him 5s., but if they are bought wholesale, then we are prepared to get 5 or 6 per cent. on the outlay and are willing to sell at 3s. 9d. or 3s. 10d. each. Surely it is not considered a saving when men buy wholesale and thus save on the purchase. A sum of £500 has been mentioned. I do not understand the matter at all; in fact I do not understand the Amendment at all, and I am fortified in my ignorance because the Financial Secretary, in reply, said that he did not quite understand the Amendment as it was worded, but that it enabled the matter to be discussed. The whole thing is more like a clown and pantaloon affair; it has no meaning, it is put forward because it will raise a discussion.

Sir F. ACLAND: It will do exactly what I desire.

Mr. LOGAN: And, therefore, the right hon. Gentleman has put down what he did not mean in order to get a discussion. The Government reply and give him the answer he requires. The Government are adepts in answering Amendments of this description, in answering according to the Amendments that are put down. It appears that most of them are put down in order to get answers, but no one knows what the answers are going to be except perhaps the responsible Ministers. And then the hon. Member says that the answer satisfies him and withdraws the Amendment. It is too ridiculous. If the Government would only tell us that they mean "No" to every Amendment, we should understand it much better, and there would be no waste of time. If they will only tell us that they will not consider anything that is brought forward, they might as well bring the business to an end and let hon. Members get home instead of wasting their time here.

8.53 p.m.

Mr. GURNEY BRAITHWAITE: I do not intend to delay the Committee for more than a few moments but I have been requested by my constituents in the City of Sheffield, where we have 4,700 unemployed lads on allotments, to say a word or two in support of this Amendment. Whatever the fate of the Amendment may be the Committee is indebted to the right hon. Member for North Cornwall (Sir F. Acland) for raising this matter. I am not going to enter into rivalry with the hon. Member for West Leyton (Sir W. Sugden) by saying that my constituency has the finest allotment holders in the country, because the Committee will not believe me, but I can assure him that when he speaks about swings and roundabouts we have no time for them in Sheffield, because the allotment holders are too busy working on their allotments raising the necessary food for their sustenance. We have a great experiment in the allotment movement, and the Committee, whatever their views may be as to the rights and wrongs of the taxation of co-operative societies, will, I am sure, be inclined to give sympathetic attention to this question, which comes rather outside the sphere of the
taxation of co-operative societies. The hon. and learned Member for Bridgwater (Mr. Croom-Johnson) put the matter very ably, and I only want to put two suggestions before the Committee, with which I hope the Financial Secretary will agree.
There is a sentimental interest attaching to the allotment movement, particularly when we remember its origin. We remember how allotments were developed during the Great War for the purpose of growing food for our own working classes, and how the Government to-day are endeavouring to ensure that more food is grown in this country. I believe that the men at present engaged on allotments may get a sufficient love of the soil to become useful recruits to the revival of agriculture, and may enable us to reverse the drift that is now going on from the countryside into the towns, a drift which has caused so much embarrassment in relation to employment and housing in the towns. I ask the Chancellor of the Exchequer to bear in mind that aspect of the question. The revenue at stake is very trifling and is not a matter to be taken in conjunction with the main question that we have been discussing to-day. I have been asked to raise this question by a considerable number of my constituents who are benefiting greatly from work on their allotments.

8.56 p.m.

Sir SAMUEL R0SB0THAM: On be-half of the smallholdings, and allotments committee of the important county of Lancashire, I put in a plea to the Financial Secretary that allotment associations should be exempted from any tax whatever. We are not discussing the question of profits from allotments. We are discussing the question of profits from trading societies which deal with allotments. These trading societies do a good work and give valuable assistance to allotment holders in recommending the best varieties to plant. Another fact to be remembered is that a large number of ladies and gentlemen are giving their services to this useful work. I might mention the Society of Friends. If you go to the Friends Meeting House at the height of the season you will find there ladies and gentlemen who are giving their services for the love of the work. Is it right that their services should be calculated in
terms of profit? Then there is the nuisance of having to fill up forms. Farmers do not like it, let alone allotment holders. These men love their allotments. Let us not do anything to harass them in their useful occupation.

9.0 p.m.

Sir S. CRIPPS: It is very interesting to find this development of anxiety on behalf of allotment holders among supporters of the Government who, in the economy campaign, took away £60,000 in order to assist the Exchequer, and thereby very largely defeated the most important allotment movement amongst the unemployed which had been started by their predecessors. Still, perhaps even a late recovery of sanity is to be welcomed. But the sanity is not shared by the Financial Secretary. Apart from the illogical meanness of the tax, this is just a specific instance of what the proposal of the Government is going to do. It happens to be an instance which shows up in a particularly effective way the extreme un-wiseness of this class of tax. I dare say that the Financial Secretary and the Chancellor of the Exchequer would very much like to exempt allotment societies, and I am sure that the Treasury would, because it would save them an infinity of trouble. But if they did exempt allotment societies the whole argument for the tax would disappear. That is why the Financial Secretary has to sit there, in spite of his own desire and the Treasury's desire, and to refuse this Amendment, because he knows that if he accepted it the whole case for co-operative society taxation would disappear.

9.1 p.m.

Mr. HORE-BELISHA: I wish to remove, if I can, the general misapprehension under which this Debate has proceeded. If anyone had listened to it without realising what the Amendment was, they would have assumed that we were about to put some penalty on allotment holding. Let us be quite plain, and at least let us know what we are not doing. So far as the activities of societies in providing allotments are concerned, there is no change in the position whatever, and there is no burden being placed on the societies. So far as individual allotment holders are concerned, they are not called upon as individuals to pay anything that they are not paying now. It is represented that the societies will be called upon to
fill in forms which they do not now fill in. But the societies are already assessable to tax under Schedule A. No burden is of necessity placed on any allotment society at all.
We are dealing here, not with allotment societies, but with all societies and companies engaged in trade. If a profit be made out of trading it matters not whether the profit is made by a co-operative society or a company. They are assessable to tax if they make a profit. That is all that the Government are doing. I suggest that if the accounts of some of these societies were closely examined there would be no sense of grievance. Although I have listened to five or six speeches describing the virtue of allotment holding, from which I do not dissent, not a single Member has given an instance of any hardship that falls on any single person. There is no special burden being placed on allotment holders, whom everyone desires to encourage.

9.4 p.m.

Mr. TINKER: The Financial Secretary to the Treasury cannot have followed the Debate closely, because an hon. Member on this side stated that he had studied this question very closely and he was satisfied that it meant a great hardship to the best allotment holders in Great Britain, and the hon. Member for Hillsborough (Mr. G. Braithwaite) also said that he had examined the question very carefully, and he emphasised what the proposal meant to his people. The hon. Member for Ormskirk (Sir S. Rosbotham) also has paid great attention to this question. I know that he has been chairman of the allotment holders in his division for some time. He is one of the strongest supporters of the Government. On other points, when I thought he might have come with us, he has gone with the Government. Apparently he feels that in this case he cannot support the Government and with his knowledge-of what the Government's proposal means to allotment holders, I think he is prepared to go into the Division Lobby with us on this Amendment.

Sir S. ROSBOTHAM: No, I am not.

Mr. TINKER: I am disappointed. I thought the hon. Member felt so strongly on this subject that he would vote for the Amendment. I was banking on that. I did not think that there was much in
this Amendment when the discussion started, but, having heard all that the defenders of the allotment-holders had to say I thought that hon. Members opposite who feel so strongly upon the matter would have the courage of their convictions and would go into the Lobby for the benefit of the allotment-holders. I hope the right hon. Gentleman the Member for North Cornwall (Sir F. Acland) will not withdraw the Amendment. Indeed if he attempts to do so I warn him that we shall insist on going to a division.

9.6 p.m.

Mr. PIKE.: In spite of what has been said by the hon. Member for Leigh (Mr.

Tinker) and also by the hon. and learned Member for East Bristol (Sir S. Cripps) I think we cannot do other than give wholehearted support to the Government on this question. It has been stated quite definitely that if the Government gave way on this very human question, as it has been described, they would have to give way to all the other arguments which have been put up regarding cooperative societies taxation For that reason I shall do my best to see that the Amendment is defeated.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 65; Noes, 206.

Division No. 214.]
AYES.
[9.8 p.m.


Acland, Rt. Hon. Sir Francis Dyke
Griffith, F. Kingsley (Middlesbro'.W.)
Mander, Geoffrey le M.


Aske, Sir Robert William
Groves, Thomas E.
Maxton, James


Attlee, Clement Richard
Grundy, Thomas W.
Milner, Major James


Batey, Joseph
Hall, George H. (Merthyr Tydvil)
Nathan, Major H. L.


Bevan, Aneurin (Ebbw Vale)
Hamilton, Sir R. W.(Orkney & Zetl'nd)
Owen, Major Goronwy


Braithwaite, J. G. (Hillsborough)
Hirst, George Henry
Parkinson, John Allen


Brown, C. W. E. (Notts., Mansfield)
Holdsworth, Herbert
Price, Gabriel


Cape, Thomas
Jenkins, Sir William
Roberts. Aled (Wrexham)


Cocke, Frederick Seymour
John, William
Salter, Dr. Alfred


Cove, William G.
Jones, Henry Haydn (Merioneth)
Smith, Tom (Normanton)


Cripps, Sir Stafford
Jones, Morgan (Caerphilly)
Sugden, Sir Wilfrid Hart


Croom-Johnson, R. P.
Kirkwood, David
Thorne, William James


Curry, A. C.
Lansbury, Rt. Hon. George
Tinker, John Joseph


Daggar, George
Lawson, John James
Wallhead, Richard C.


Dobble, William
Leonard, William
White, Henry Graham


Edwards, Charles
Logan, David Gilbert
Williams, David (Swansea, East)


Evans, David Owen (Cardigan)
Lovat-Fraser, James Alexander
Williams, Edward John (Ogmore)


Evans, Capt. Ernest (Welsh Univ.)
Lunn, William
Williams, Thomas (York, Don Valley)


Foot, Isaac (Cornwall, Bodmin)
Macdonald, Gordon (Ince)
Wood, Sir Murdoch McKenzie (Banff)


George, Major G. Lloyd (Pembroke)
McEntee, Valentine L.



Graham, D. M. (Lanark, Hamilton)
Maclay, Hon. Joseph Paton
TELLERS FOR THE AYES.—


Greenwood, Rt. Hon. Arthur
Mainwaring, William Henry
Mr. Walter Rea, and Mr. Harcourt


Grenfell, David Rees (Glamorgan)
Mallalieu, Edward Lancelot
Johnstone.


NOES.


Adams, Samuel Vyvyan T. (Leeds, W.)
Cayzer, Maj. Sir H. R. (P'rtsm'th, S.)
Fremantle, Sir Francis


Agnew, Lieut.-Com, P. G.
Chamberlain, Rt. Hon. N.(Edgbaston)
Galbraith, James Francis Wallace


Albery, Irving James
Clarke, Frank
Gibson, Charles Granville


Allen, Lt.-Col. J. Sandeman (B'k'nh'd)
Cobb, Sir Cyril
Glossop, C. W. H.


Applin, Lieut.-Col. Reginald V. K.
Cochrane, Commander Hon. A, D.
Gluckstein, Louis Halle


Bailey, Eric Alfred George
Colfox, Major William Philip
Goff, Sir Park


Baldwin, Rt. Hon. Stanley
Collins, Rt. Hon. Sir Godfrey
Goldie, Noel B.


Banks, Sir Reginald Mitchell
Colville, Lieut.-Colonel J.
Goodman, Colonel Albert W.


Barclay-Harvey, C. M.
Conant, R. J. E.
Gower, Sir Robert


Beaumont, Hon. R.E.B. (Portsm'th.C.)
Courthope, Colonel Sir George L.
Grattan-Doyle, Sir Nicholas


Birchall, Major Sir John Dearman
Craddock, Sir Reginald Henry
Gretton, Colonel Rt. Hon. John


Bowyer, Capt. Sir George E. W.
Croft, Brigadier-General Sir H.
Gritton, W. G. Howard


Braithwaite, Ma|. A. N. (Yorks. E. R.)
Crooke, J. Smedley
Gunston, Captain D. W.


Brass, Captain Sir William
Cruddas, Lieut.-Colonel Bernard
Hales, Harold K.


Briscoe, Capt. Richard George
Culverwell, Cyril Tom
Hamilton, Sir George (Ilford)


Broadbent Colonel John
Dalkeith, Earl of
Hanley, Dennis A.


Brown, Col. D. c. (N'th'l'd., Hexham)
Davison, Sir William Henry
Hannon, Patrick Joseph Henry


Brown, Ernest (Leith)
Denman, Hon. R. D.
Harvey, George (Lambeth, Kenningt'n)


Browne, Captain A. C.
Drewe, Cedric
Haslam, Henry (Horncastle)


Buchan-Hepburn, P. G. T.
Dugdale, Captain Thomas Lionel
Haslam, Sir John (Bolton)


Burghley, Lord
Duncan, James A. L. (Kensington, N.)
Headlam, Lieut.-Col. Cuthbert M.


Burnett, John George
Elliston, Captain George Sampson
Heilgers, Captain F. F. A,


Cadogan, Hon. Edward
Elmley, Viscount
Hepworth, Joseph


Campbell, Edward Taswell (Bromley)
Emmott, Charles E. G. C.
Hills, Major Rt. Hon. John Waller


Campbell, Vice-Admiral G. (Burnley)
Erskine-Boist, Capt. C. C. (Blackpool)
Hore-Belisha, Lesile


Campbell-Johnston, Malcolm
Evans, Capt. Arthur (Cardiff, S.)
Hornby, Frank


Caporn, Arthur Cecil
Everard, W. Lindsay
Hudson, Capt. A. U. M.(Hackney,N.)


Cassels, James Dale
Fade, Sir Bertram G.
Hudson, Robert Spear (Southport)


Cautley, Sir Henry S.
Fielden, Edward Brocklehurst
Hunter, Capt. M J. (Brigg)


Jackson, Sir Henry (Wandswortn, C.)
O'Donovan, Dr. William James
Southby, Commander Archibald R. J.


Jamieson, Douglas
O'Neill, Rt. Hon. Sir Hugh
Spens, William Patrick


Jeason, Major Thomas E.
Penny, Sir George
Stanley Hon. O. F. G. (Westmorland)


Jones, Lewis (Swansea, West)
Petherick, M.
Steel-Maitland, Rt. Hon. Sir Arthur


Ker, J. Campbell
Peto, Geoffrey K.(W'verh'pt'n,Bliston)
Stevenson, James


Kimball, Lawrence
Pike, Cecil F.
Stones, James


Lamb, Sir Joseph Quinton
Potter, John
Strauss, Edward A.


Law, Richard K. (Hull, 8.W.)
Raikes, Henry V. A. M.
Strickland, Captain W. F.


Lees-Jones, John
Ramsay, Alexander (W. Bromwich)
Stuart, Lord C. Crichton-


Leigh, Sir John
Ramsbotham, Herwald
Sueter, Rear-Admiral Murray F.


Leighton, Major B. E. P.
Ramsden, Sir Eugene
Summersby, Charles H.


Lennox-Boyd, A. T.
Rankin, Robert
Tate, Mavis Constance


Levy, Thomas
Reed, Arthur C. (Exeter)
Templeton, William P.


Liddall. Walter S.
Reid, Capt. A. Cunningham.
Thompson, Luke


Lindsay, Noel Ker
Reid, David D. (County Down)
Thomson, Sir Frederick Charles


Lockwood, John C. (Hackney, C.)
Remer, John R.
Thorp, Linton Theodore


Loder, Captain J. de Vera
Rentoul, Sir Gervals S.
Titchfield, Major the Marquess of


Lyons, Abraham Montagu
Renwick, Major Gustav A.
Todd, A. L. S. (Kingswinford)


MacAndrew, Lt.-Col C. G. (Partick)
Rhys, Hon. Charles Arthur U.
Tryon, Rt. Hon. George Clement


Mac Andrew. Capt. J. O. (Ayr)
Roberts, Sir Samuel (Ecclesall)
Vaughan-Morgan, Sir Kenyon


McLean, Major Sir Alan
Rosbotham, Sir Samuel
Ward, Lt.-Col. Sir A. L. (Hull)


McLean, Or. W. H. (Tradeston)
Rose Taylor, Walter (Woodbridge)
Ward, Irene Mary Bewick (Wailsend)


Maitland, Adam
Runge, Norah Cecil
Ward, Sarah Adelaide (Cannock)


Makins, Brigadler-General Ernest
Rutherford, John (Edmonton)
Wardlaw-Milne, Sir John S.


Manningham-Buller, Lt.-Col. Sir M.
Rutherford, Sir John Hugo (Liverp'l)
Warrender, Sir Victor A. G.


Margeeson, Capt. Rt. Hon. H. D. R.
Salmon, Sir Isidore
Waterhouse, Captain Charles


Martin, Thomas B.
Salt, Edward W.
Welle, Sydney Richard


Mayhew, Lieut.-Colonel John
Samuel, Sir Arthur Michael (F'nham)
Whiteside, Borras Noel H.


Meller, Richard James
Samuel, Samuel (W'dsworth, Putney)
Whyte, Jardine Bell


Mills, Major J. D. (New Forest)
Sandeman, Sir A. N. Stewart
Williams, Herbert G. (Croydon, S.)


Mitchell, Harold P. (Br'tf'd & Chisw'k)
Sanderson, Sir Frank Barnard
Wills, Wilfrid D.


Mitchell, Sir W. Lane (Streatham)
Scone, Lord
Wilson, Clyde T. (West Toxteth)


Molson, A. Hugh Elsdale
Shaw, Helen B. (Lanark, Bothwell)
Wilson, G. H. A. (Cambridge U.)


Monsell, Rt. Hon. Sir B. Eyres
Shepperson, Sir Ernest W.
Windeor-Clive, Lieut.-Colonel George


Morris-Jones, Dr. J. H. (Denbigh)
Slater, John
Wise, Alfred R.


Munro, Patrick
Smiles, Lieut.-Col. Sir Walter D.
Womersley, Walter James


Murray-Phillpson, Hylton Raiph
Smith, R. W. (Ab'rd'n & Kinc'dine, C.)
Young, Rt. Hon. Sir Hilton (S'v'noaks)


Nation, Brigadier-General J. J. H,
Smith-Carington, Neville W.



North, Edward T.
Somervell, Donald Bradley
TELLERS FOR THE NOES —


Nunn, William
Somerville, Annesley A. (Windsor)
Major George Davies and Lord


O'Connor, Terence James
Sotheron-Estcourt, Captain T. E.
Erskine.

The DEPUTY-CHAIRMAN (Captain Bourne): Before I call upon the hon. Member for Workington (Mr. Cape) to move the next Amendment, I think it only fair to warn him that I have had considerable doubt as to whether his Amendment and the next four Amendments on the Order Paper—dealing with profits or surplus allocated to hospitals, convalescent homes or welfare centres, educational or literary purposes, members' benevolent funds, holiday and recreational purposes, or industrial relief— are really in order, in view of the provisions of paragraph (6) of the Ways and Means Resolution. I have come to the conclusion that it is only reasonable to give hon. Members the benefit of the doubt, but I must warn them that if the Debate should show me that my doubt is well founded, I shall be obliged to intervene and withdraw the Amendment from the consideration of the Committee. Also, I think it would be desirable that we should have a general discussion on these five Amendments on this first Amendment.

9.16 p.m.

Mr. CAPE: I beg to move, in line 5, after the word "surplus," to insert the words:
(other than any profit or surplus allocated by a society to hospitals, convalescent homes, or welfare centres).
I want to thank you, Captain Bourne, first of all for giving me the benefit of the doubt, and, secondly, I want to assure you that I am never out of order in anything that I say in this House. At one time during the Debate on the previous Amendment I thought it would not be necessary to move this Amendment. The Chancellor of the Exchequer gave a very hurried answer with regard to donations to hospitals, Convalescept homes, and so on, and after considering his answer, I was in great doubt, like the Chairman, as to what was meant. Therefore, I think it is right that we should have some debate on this Amendment and the other similar Amendments and endeavour to get a definite answer from the Chancellor.
The right hon. Gentleman said that the donations to these institutions would be on similar lines to donations given by individuals or companies to similar institutions, but although I am not very well versed in the way in which these exemptions are obtained, I understand that an individual or a company has to
give a seven years' guarantee that the donation will be paid to these institutions before being able to claim exemption. If that be so, the case of these societies will not be met if they are given that privilege, because it is very difficult for a mutual trading society to give a guarantee for that length of time. The Majority of these societies are run on purely democratic lines and have not got executive powers for their management committees, and, therefore, every half-year, when they meet to consider their revenue and surplus, the meeting resolves itself into considering what donations shall be made.
As a matter of fact, having myself been a general secretary, I can speak from experience. We generally pay something to the hospitals and convalescent homes in our locality every year as a donation for the benefit of our people, but in these times we sometimes have to reduce our amounts as compared with what we have previously given. For three or four years we gave a fairly substantial grant to one or two hospitals, not only in our own area, but outside as well, because of the specialist treatment that our people obtained there, but we found this year, owing to so many of our men being unemployed and our revenue having considerably decreased, that unfortunately we had to decrease our donations to these hospitals. It is the same with the cooperative societies. They cannot say that for seven years they will give a certain amount to the hospitals or the convalescent homes. They must be subject to the meetings which are held from time to time to decide what snail be given, according to the position in which the societies find themselves for the time being. We ask in this Amendment that the donations to these various worthy institutions should be exempt from taxation. These institutions are undoubtedly for the benefit and welfare of members, not only of co-operative societies, but of the general working-class community.
May I put another point? I think it will be admitted that the Majority of cooperative society members come from the industrial working class. In the Majority of industries there is generally an agreement come to by employers and workmen under which so much is taken from
the men's wages for hospitals, convalescent homes, and so on. These men, generally speaking, are also members of the co-operative societies in their immediate neighbourhood, and so they find themselves contributing again to these institutions through the co-operative societies, and unless this Amendment is accepted, those contributions will be subject to taxation. I invite the Chancellor of the Exchequer to consider this question very seriously and to realise that it is of great importance to these people. At the present time hospitals and similar institutions are generally maintained by public subscriptions and donations from workers and other generous-minded people, and I think the right hon. Gentleman would be doing a great injustice to these institutions if he taxed the co-operative societies and other organisations of that kind on the money which they subscribe 80 these wonderful institutions, which are of so much benefit to the general public Therefore, I ask the Chancellor of the Exchequer, in all seriousness and earnestness, and with a great deal of hope and confidence, to accept the Amendment.

9.25 p.m.

Mr. KIRKWOOD: As we are discussing these Amendment? together, I wish to say a few words with reference to the Amendments to which I have put my name, and which, I hope, the Chancellor of the Exchequer will accept. The first Amendment asks him to exempt any profit or surplus allocated by a society to a members' benevolent fund. The right hon. Gentleman will see that we have a good case here when he remembers that this is a huge organisation with millions of people connected with it who, out of the goodness of their hearts, have allocated a certain sum of their own money to a benevolent fund in order to assist their own poor. Surely the right hon. Gentleman can see his way to exempt money reserved for that purpose. The second Amendment asks for the exemption of any profit or surplus allocated to holiday and recreationl purposes. I hope I shall not appeal in vain to the Chancellor of the Exchequer to exempt a fund which has such a noble purpose in view. There would be no need for those funds if we were not dealing with people who cannot ordinarily enjoy a holiday. They have not got the money
to go for a holiday but, by their combined effort and by uniting their pence and paying in 6d. or 3d. a week into a fund, they are enabled to get away for a holiday.
As a result of these funds, people connected with the co-operative (movement have been enabled to visit different parts of Britain. The Scottish co-operative women have been enabled not only to visit the beauty spots of the Highlands, but have been able to come from Glasgow to visit London. Had it not been for this fund, that would have been quite impossible for them. I wish that I could show the right hon. Gentleman a real working-class district so that he could see the activities of the co-operative movement among the women. Very poor women, who had never had a holiday and were tied to their own particular town or district, have been enabled through the co-operative movement to get a holiday and to see other parts of the country than their immediate surroundings. I hope the Chancellor of the Exchequer will weigh the matter very carefully, because it is a very serious point to tens of thousands for whom. I am appealing to-night. As to exemption for recreational purposes, this is again evidence in itself that we are appealing for the poor. Otherwise, those people would be able to have their own gymnasium and other forms of recreation. They are poor people with no means of getting recreation, and again the co-operative movement has stepped into the breach and organised within its own membership recreational facilities and amusements. To do this work it requires funds, and I appeal to the Chancellor of the Exchequer on behalf of those people to exempt those funds from taxation.

9.32 p.m.

Mr. CROOM-JOHNSON: May I, first of all, thank the Chancellor of the Exchequer for the answer he gave me earlier to-day? I am sure he will not misunderstand me when, I say I have a little acquaintance with the subject and I well understood, when I put my question, that, as far as the charitable part of their work is concerned, the co-operative societies will fall within the general Income Tax law and have the same benefits and advantages as the ordinary trading companies in dealing with hospitals, convalescent homes, and welfare centres. In
view of that answer, it seems to me that the first Amendment on the Paper is really unnecessary, because the co-operative societies will get such advantages as the trading companies get at present, the only difference being that the co-operative societies are not to be charged tax upon the whole of their profits and gains, but only upon so much of them as represent the surplus under Sub-section (1) of the new Clause. When we come to the other proposals, however, they would constitute a totally different measure for the cooperative societies from that which is laid down by the Income Tax Acts for the remainder of the community.
There is only one of these Amendments on which I would like a little further enlightment. I mentioned earlier this evening that in my own constituency it is the practice for the co-operative societies to lay aside out of their surplus each year small sums of money—they are not very big societies—for the purpose of granting compassionate allowances to their members when their members fall upon evil days. I do not know whether the Chancellor of the Exchequer could meet that point without infringing the general principle at which he is aiming in this legislation. I am sure that the matter has only to be brought to his notice for him either to give consideration to it, or, if consideration has already been given, for him to be able to vouchsafe some reason which will, I hope, appeal to those of us who feel that some sort of concession on this small point might be advantageous.
As to the rest of the observations of the hon. Member for Dumbarton Burghs (Mr. Kirkwood), the hon. Member has not appreciated the distinction between the allocation out of the surplus of profits of co-operative societies and the funds which co-operative societies collect from their members for the purpose of providing educational, holiday or recreational facilities for the members. While I have no right to give any assurance, or indeed to make any statement in this place as to what the law is, it seems to me, as I understand this new Clause, that these funds will be protected. They will not form any part of the surpluses of the cooperative societies. They will be separate and distinct funds like any other funds that any body of persons may choose to collect for any purpose such as, for example, the purpose of giving a testi-
monial to any Member of this House. Accordingly, those funds will not be subject to Income Tax at all under this Clause, and the fears of the hon. Member are misplaced.
I hope that the Government may be able to do something with regard to those societies which are in the habit of voting sums for compassionate allowances. I appreciate that such loose language as is used in these Amendments cannot possibly be accepted by the Government. There would obviously have to be some proper safeguard. It would have to be made plain that money allocated for compassionate allowances went to a separate fund, that it was kept separate and distinct so that there would be no possibility of it being drawn back into the general funds of the co-operative society for another purpose, and that it should be earmarked and kept specifically for compassionate allowances to which those who manage the societies mean it should be devoted.

9.38 p.m.

Mr. LOGAN: I hope that the Chancellor will give the deepest consideration to the proposals suggested in the Amendment. I do not know whether the wording proposed will suit the requirements, but I am convInced that if the Chancellor wants to find what will suit the hon. and learned Member for Bridgwater (Mr. Croom-Johnson) he will find it in the National Health Insurance Act. Many societies are in an unfortunate position and are not able to give the benefits which are necessary for the Majority of their members. Societies that have cash in hand and money to burn, as it were, over a valuation of five years, are able to give certain additional benefits. When there is a huge society with a membership of over 6,500,000, surely the Chancellor will see an opportunity of securing a coordination in regard to a particular service in the community. "Want and distress" is a special benefit. An approved society with funds can give up to £12 or £15 to an insured member. Suppose a man who is a member of a co-operative society should by ill-luck be unemployed, what a great thing it would be for the nation if a body like the co-operative society were able to give these additional benefits out of their surpluses. It is important in hospital and convalescent
treatment for a patient to be able to get out of his neighbourhood, and what a wonderful opportunity it would be if a big society with 6,500,000 members were able to give such benefits.
Owing to the great amount; of poverty many thousands of people will be turned off insurance this year. Here is an opportunity for a co-ordination of the health services of the nation with the work that the co-operative society is able to do. They could out of the goodness of their hearts make good what ought to be done natioNaily. The expenditure on Poor Law would be relieved by the grants that could be given by it, and they would not only be able to assist in cases of distress, but would be able to deal with cases that needed convalescent treatment and after care. With my experience of dealing with National Health Insurance Since the beginning, I know what great benefit can be conferred in that connection, and how wonderful it would be if the work of National Health Insurance and of great bodies like the co-operative society could be co-ordinated. The Chancellor of the Exchequer would receive more benefit by granting these concessions from the point of view of public health and public relief than he would from the amount of tax that he would collect.

9.43 p.m.

Mr. McCORQUODALE: From my reading of the Chancellor's new Clause, I cannot see any necessity for the moving of these Amendments, for it appears to me that the hon. Members whose names are attached to them have their wishes granted under the Clause. I read in paragraph (a) of Sub-section (2) that
a discount, rebate, dividend or bonus granted by the company or society to members
is exempt from tax. It does not say that these members should not be allowed to give back out of their "divi," declared and voted to them, to any fund for any specific purposes. Moneys which have been granted to them and moneys which they give back voluntarily can, according to my reading of the Clause, be put to any benevolent fund for holiday or recreational purposes, industrial relief, convalescent homes and the like. It seems to me that nobody wishes that members of co-operative societies should
be forced against their will to subscribe to these good purposes and I am sure that 99 out of every 100 members would wish, out of the dividend or surplus granted to them, to subscribe some portion of it in that way. Therefore, I suggest that these Amendments are covered by the Chancellor's Clause, and that there is no real reason why they should have to be considered.

9.46 p.m.

Mr. PRICE: The question which has been raised by the hon. Member for Sowerby (Mr. McCorquodale) is the very point at issue, for we cannot see that any provision has been made for the exemption of money set aside for that purpose. In the North of England much money is given by co-operative societies and other organisations for general hospital treatment—in some cases being allotted for the treatment of their own members and in other cases given to hospitals generally. Those of us who are interested in hospitals are finding greater difficulty than at any time in our history in getting sufficient subscriptions to maintain them. The Government have made no provision in their Budget, though I think the time has arrived when they ought to have done so, for a contribution to our big hospitals. I would like to put this question to the Chancellor. If the co-operative societies in Workshire decide to give from their surplus, after paying "divi," a grant to hospitals, will that grant be subject to tax? The hon. Member for Sowerby claims that it will not, but we are in doubt on the point.

Mr. CHAMBERLAIN: Would the hon. Member say what hospitals he has in mind? Are they local hospitals?

Mr. PRICE: They are local and county hospitals. There are several institutions to which the co-operative societies make contributions, some of the money being allocated for the particular interests of their own members. What I want to know is this. Supposing they have a surplus of £500 in a half-year. If the directors decide to give £50 or £100 of that money in contributions to hospitals in the county, or sanatoria or convalescent homes, will those contributions be taxed? If they are to be I do not think the Members of the House would support a Clause going that far. If the Government are
going to tax that money, then I think we are getting to the position when the Government will tax white mice. I would make a hearty appeal to the Chancellor of the Exchequer to give consideration to this matter, because it is bound to affect the finance of hospitals in Yorkshire, and every other county. I do not think any Member would be anxious to support a tax which would be injurious to hospitals, considering the position they are in.

9.50 p.m.

Mr. TINKER: Before putting a point to the Chancellor of the Exchequer I must refer to the speech of the hon. Member for Sowerby (Mr. McCorquodale). If he is right in his contention, there is no need for these Amendments. It is because we are in doubt and want to find out that we have brought them forward.

Mr. MCCORQUODALE: My difference with the hon. Member who has just sat down is that he said the society would make the contributions. I am arguing that the members out of their "divi" should vote the contribution which should be made.

Mr. TINKER: The members decide on it out of the surplus at their quarterly meetings. I would like to make this point clear in reply to the hon. Member for Bridgwater (Mr. Croom-Johnson). It is not the contribution which a man pays with which we are dealing here, it is the contribution out of profits or surplus which the co-operative society allocates for certain purposes. We want to know if "that is exempt from tax. From time to time we have mine disasters and the co-operative societies in the locality make grants. In the last 10 or a dozen years we have made grants in various places totalling £100,000. In my own constituency there was a sad disaster last October, and £l,200 was granted by the society to help the victims. Later, a similar thing happened in another part of Lancashire, and another £1,000 was granted by a meeting of members deciding that of their profits or surplus which would ordinarily be paid in the way of "divi" should be given to help those in distress. It may be argued from the other side that the private shopkeeper also contributes, and that he is not exempted. Our answer to that is that individual co-operators do the same thing out of their private purses. In addition
to making grants from the co-operative society every one who can afford it gives something out of his own pocket and so that equals us with the private trader. What we are asking is whether those grants given wholeheartedly and generously to people in need will be exempt from this tax or not.

9.53 p.m.

Mr. McBNTEE: I do not think the Chancellor would desire to make any difference between money voted by a co-operative society and any other money voted provided it is devoted to the same purpose, that is, the relief of suffering and the provision of sanatoria and the like. I have no doubt he has already seen a difficulty arising out of the difference between such donations and those made by the co-operative societies. The seven years' limit has already been mentioned. There is a difficulty which co-operators will find it hard to get over, if it is possible to overcome it at all. Under the ordinary law money devoted in that way is exempt from tax provided it is voted annually over a period of seven years. The rules of the cooperative movement prevent them from doing things in that way. Co-operators are bound to submit to their members at their quarterly meetings any donations which they propose to give to hospitals or such institutions. It would not be possible at one of the quarterly meetings to pass a resolution covering contributions for seven years ahead. Apart from that, however, I do not think it could be the desire of the Chancellor to prevent co-operators from giving donations, which usually are continued for a period far beyond seven years. Surely the Chancellor could exempt those contributions in the same way that other such contributions are exempt. I ask him, in the interests of all hospitals, to make this concession.
I have always been a very firm believer in the principle of mutual aid. I joined a co-operative society because it appeared to me that co-operative societies were interested in mutual aid. As a mutual-aid advocate who joined a co-operative society because it carried on the mutual-aid idea, I have an opportunity, like any other member, of attending a quarterly meeting of my society. On the agenda for this meeting, I see the purpose for
which our money is to be used. It is our money. If I had the desire, and could get a Majority of the members to agree with me, I could instruct the committee that every penny of that money should be paid over in dividends. Instead of giving that instruction, we agree that certain portions of our money shall be devoted for purposes other than that of dividends; we decide that educational lectures and classes shall be given, and the money distributed in various ways.
I am anxious that the co-operative movement shall develop, and because of my desire to develop that movement, I believe that a certain amount of educational and propaganda work should be carried on. We institute classes of various kinds for young people, as well as for elderly people. Lectures are given, and classes are held, to study co-operation and other matters, and they are paid for by the money which we might have claimed as dividends. We have made a surplus by efforts of mutual aid and mutual trading, and instead of saying to our committee: "We insist that all that money shall be divided among us in dividends," we say: "We want part of that in dividend, and we desire that the other part, under our instructions, shall be devoted to purposes such as education." I submit that if the principle is right that mutual aid shall operate, and mutual trading concerns be carried on, and if there is a surplus after the dividend is allocated, surely we have the right to say whether we shall have that money carried to our dividend or whether we shall instruct the committee to use it in other ways. If money paid out for dividends is not to be taxed, I cannot see why the Chancellor says that that part should be taxed which we decide shall be used in other ways.
If we cannot get the principle conceded, I ask the Chancellor of the Exchequer to make a concession so that we shall be able to continue the contributions that we have made in the past, and hope to make in the future without any diminution in the amounts, to sanatoria and such institutions, as well as for educational purposes. If the Chancellor is not willing to concede that, we have no alternative but to believe that it is the definite desire of the Government to injure the co-operative movement and
to do all they can to make it impossible for co-operative societies to continue their admittedly good work. I do not believe in the things in which the Chancellor believes in politics, and he does not believe what I believe, but I think that he will agree that donations made from any source to hospitals are made for a good purpose. It is a matter of detail as to how long that sum shall be devoted to that purpose. Seven years is the period of time that is in discussion now; Surely it is possible to get over that, if the desire is that those grants to good institutions shall be continued. If we cannot get the greater concession—I ought not to call it a concession because, in my view, it is a right—I hope that the right hon. Gentleman will concede this point.

10.1 p.m.

Mr. WALLHEAD: I would like the Chancellor to take note that this Amendment asks that contributions paid out of the reserve fund by co-operative societies shall be exempt from taxation. These contributions are voted by persons who, as has been repeatedly stated in this Debate, are comparatively poor people; 95 per cent. of them are below the Income Tax limit. In addition to the grants that are made by them out of their reserve fund towards hospitals and sanitoria, some co-operators, in so far as they are working in factories or mines, make a regular contribution to hospitals, and the contribution that they make from their co-operative surplus is in addition to the workshop and pithead collections, which go on regularly, and which form one of the most regular parts of hospital finance and revenue. In thus making contributions from their co-operative surplus they, in effect, pay twice. The working class are very good supporters of hospitals. They pay rather more than then-share. I ask the Chancellor to bear that fact in mind, and to allow these contributions made out of the hardly-won savings of the working people to be exempt from the tax which he is proposing.

10.3 p.m.

Mr. CHAMBERLAIN: Although it is not possible for me to accept these Amendments, yet, in listening to the speeches that have been made, I have come to the conclusion that the Amendments themselves go a good deal further than what hon. Members are asking. I
hope that the answer I shall give will satisfy them, and that I may be able to reassure them as to the fears and anxieties that they have expressed. There has been some misunderstanding on two points. The hon. Member who opened this discussion put into my mouth, no doubt not quite remembering what I said, words which I did not use. I did not say that co-operative societies in this respect would be in the same position as private individuals; I said that they would be in the same position as trading companies, which is quite a different thing. There is no question of the seven-year guarantee in considering what has to be allowed as a trading expense, or in computing the profits or gains of a trading company. I hope that hon. Members will clear from their minds the idea that there is any question of the seven-year guarantee.
The second point was due to an observation of the hon. Member for Dumbarton Burghs (Mr. Kirkwood), who sometimes gets so interested in his speech that he extends his observations a little beyond the subject which he is discussing. He spoke about contributions of 3d. per week by employes of a co-operative society. As another hon. Member pointed out, if the employes of a cooperative society choose to contribute weekly some small sum to a fund which is set up for a particular purpose, those contributions are not trading receipts, and they are not subject to Income Tax at all. That is not what these Amendments deal with. They deal with the question whether the allocations out of the general reserve of a co-operative society for particular purposes should be taxed or not taxed. [HON. MEMBERS: "Out of the surplus."] Out of the surplus; I think we all understand what is meant. Circumstances differ so much in different cases that one has to be rather careful about making too sweeping a generalisation, lest one might, perhaps, be betrayed into including something which is not quite correct. Therefore, I would make this general proviso beforehand, that each individual case has to be judged on its merits, but I will try and explain what the merits are, so that hon. Members may see that the cases about which we are talking are practically covered by the existing law and practice.
In the first place, allocations of the nature of Capttal expenditure would not be exempt from tax. Income Tax, of course, deals with income, and not with Capttal But I think that that is not what hon. Members are troubled about. They are thinking of occasional donations or annual subscriptions, and, in regard to occasional donations or annual subscriptions for any of the various objects dealt with in these Amendments, the guiding question really is as to what is the relation of those donations or subscriptions to the trading business which is being carried on. To put it quite broadly and generally, if these donations or subscriptions are made for the welfare of the employés of the co-operative society or company, they would be admissible as a trade expense—[HON. MEMBERS: "Or members?"]—No; I am talking about the employés of a trading society. In considering the position we have to remember that we are dealing with the result of trading, and, therefore, it is of the application to the employées of companies or societies that I am speaking.
To take the case of hospitals, regarding which the hon. Member for Hemsworth (Mr. Price) put to me a straight question, as I said in answer to my hon. and learned Friend the Member for Bridgwater (Mr. Croom-Johnson), the question there is whether those hospitals are available for the welfare of the employes. In that case they obviously would be so available, and, therefore, these subscriptions or donations would be admissible as a trade expense, and not subject to taxation, although they might be taken out of the surplus of the society. In the same way, in the case of educational or literary allocations, if those allocations were for the welfare of the employes, or if they were for advertising purposes— that is to say, for the benefit and encouragement of trading—they would be admissible as a trade expense, and, therefore, not subject to tax. The question, which was also put by my hon. and learned Friend, as to small sums granted as compassionate allowances for employds who had fallen on evil days, or for their families—[HON. MEMBERS: "Or members"]—I understood that my hon. and learned Friend was speaking of employes, and I make that distinction. If they were for employes they would be admis-
sible as a trade expense, but, of course, in the case of donations or subscriptions let us say by a Yorkshire co-operative society to a hospital in London, one could hardly say that that was in connection with employes of the society, and I do not think that they should be permitted as a trade expense.

Mr. McENTEE: Would a subscription, say, from a Yorkshire society to a national institution be subject to tax?

Major COLFOX: I understood the Tight hon. Gentleman to say that if a cooperative society makes a contribution to a local hospital,, and thereby enables its own employes to go to the hospital, the contribution would escape taxation. Would that be so in the case of a private employer who makes a contribution to a local hospital, enabling his employes to go to that hospital?

Mr. CHAMBERLAIN: Yes; that is exactly what I have been saying. Trading concerns do make subscriptions to hospitals and convalescent homes and other institutions for the welfare of their employés—

Major COLFOX: Perhaps I did not make myself quite clear. I understand that that is so in the case of a company, but is it also true in the case of a private individual employer of labour?

Mr. CHAMBERLAIN: If my hon. And gallant Friend means a private employer of labour, in the sense of a man who employs a gardener or some servant of that kind, no. That is not trading. It is only in the case of trading. A person carrying on a trade and subscribing to a hospital, thereby making hospital treatment available for his employes, would be in exactly the position which I have described.

Mr. LOGAN: Would the right hon. Gentleman agree that in the case of a company or society in, say, Yorkshire or Lancashire, subscribing to a specialist hospital to which they could send a patient, even though it might be in the south of England, that would be within his description?

Mr. CHAMBERLAIN: Certainly. It is not necessarily a question of the locality. The test is whether it is for the welfare of the employés. It would, of course, in the ordinary ease, be a local hospital, but
a subscription to a specialist hospital which was not necessarily in the locality, but somewhere else, would come within the exemption.

Sir SAMUEL ROBERTS: Would this remission be available to a landowner who employed carpenters and repairers on his property, in the case of a subscription by him to the local hospital?

Mr. CHAMBERLAIN: Not unless he is trading. We are talking about trading only. There is a clear distinction. It is not possible to give a general answer on this question, but I have endeavoured to make clear the general principles which govern the matter. No doubt there will be certain cases on the border line, as it were, which would have to be examined beforehand.

Mr. TINKER: Will the right hon. Gentleman deal with the question of grants for industrial distress?

Mr. CHAMBERLAIN: One would have to consider how far that would relate to the particular trading society or company in question. For instance, I think there is a case in which a colliery company—not a co-operative society at all—made a contribution towards general distress in its own neighbourhood, and that was allowed as a trade expense. There again, it must depend upon the particular circumstances of the case.

10.14 p.m.

Sir S. CRIPPS: I am afraid what the right hon. Gentleman has said will not in the least meet the point that we desire to put forward. He has stressed, quite rightly and accurately, that all these various payments must be made on behalf of employes and that, of course, is the existing law as regards other companies. But co-operative societies are concerned with payments made on behalf of members, and not of employes, and the position as we see it is this, A co-operative society has a surplus available and, in order to provide hospital accommodation for its members, makes a large donation to a local hospital. The members have the alternative of taking the money in dividend or of having this hospital benefit. Surely it is a proper and right use of the money on exactly the same basis as the use of it for "divi." It is not possible for each member to make a contribution singly, nor would he get the same result if he did. The combined con-
tribution from the members gives much greater security to the hospital and enables it to give them facilities which cover them as a whole. It is that case which we want the right hon. Gentleman to consider and not the case of the employes, which is already dealt with.
As regards the other matters, the right hon. Gentleman said that, where an expenditure of this type was of the same sort as advertising in the business, that would be allowed as an advertising expense. Take a case where a co-operative society gives a grant of many thousands of pounds to the sufferers from a colliery disaster. Is it conceivable or likely that the Inland Revenue would allow such a grant as an advertising expense? If the right hon. Gentleman will give an undertaking that all matters of that sort, subscriptions for educational purposes, benevolent funds, holiday and recreational purposes, will be counted as legitimate advertising expenses, the question will largely disappear, but nothing that he has said so far leads us to feel any great confidence that that will be so. The phrase "part of the advertising expenses" is really too vague to rely on, and it is a matter which should be clarified by the insertion of definite words placing it beyond dispute what class of expenses may be considered as advertising expenses, a matter that may lead to many legal discussions if it is left open. Therefore, we are not prepared to withdraw these Amendments.

10.19 p.m.

Mr. COCKS: I should like to put this point. This is a case of "divi" paid in kind rather than in money. A society decides to set up educational classes, where they teach history, for example. History teaches us the lamentable fate of coalitions and the retribution which follows hard on the heels of treachery. They also set up classes for teaching economics, the lessons of which this Government seems entirely to have forgotten I should like to ask if such grants would be exempted. If they distribute the money in "divi," it is exempted. If they set up educational classes or found scholar' ships, would not that also be exempted?

Question put, "That those words be there inserted."

The Committee divided: Ayes, 66; Noes, 231.

Division No. 215.]
AYES.
[10.21 p.m.


Aske, Sir Robert William
Hamilton, Sir R. W.(Orkney & Zetl'nd)
Mason, David M. (Edinburgh, E.)


Attar, Viscountess (Plymouth, Sutton)
Harris, Sir Percy
Maxton, James


Attlee, Clement Richard
Hirst, George Henry
Milner, Major James


Batey, Joseph
Holdsworth, Herbert
Nathan, Major H. L.


Bevan, Aneurin (Ebbw Vale)
Janner, Barnett
Parkinson, John Allen


Briant, Frank
Jenkins, Sir William
Price, Gabriel


Brown, C. W. E. (Notts., Mansfield)
Johnstone, Harcourt (S. Shields)
Rathbone, Eleanor


Cape, Thomas
Jones, Henry Haydn (Merioneth)
Rea, Walter Russell


Cooks, Frederick Seymour
Jones, Morgan (Caerphilly)
Roberts, Aled (Wrexham)


Cove, William G.
Kirkwood, David
Salter, Dr. Alfred


Cripps, Sir Stafford
Lansbury, Rt. Hon. George
Smith, Tom (Normanton)


Curry, A. C.
Lawson, John James
Thorne. William James


Daggar, George
Leckie, J. A.
Tinker, John Joseph


Dobble, William
Leonard, William
Wallace. John (DunferMilne)


Edwards, Charles
Logan, David Gilbert
Wailhead, Richard C.


Evans, David Owen (Cardigan)
Lovat-Fraser, James Alexander
White, Henry Graham


Evans, Capt. Ernest (Welsh Univ.)
Lunn, William
Williams, David (Swansea, East)


George, Major G. Lloyd (Pembroke)
Macdonald, Gordon (Ince)
Williams, Edward John (Ogmore)


Graham, D. M. (Lanark, Hamilton)
McEntee, Valentine L.
Williams, Thomas (York, Don Velley)


Greenwood, Rt. Hon. Arthur
McGovern, John
Wood, Sir Murdoch McKenzie (Banff)


Grenfell, David Reel (Glamorgan)
Mainwaring, William Henry



Grundy, Thomas W.
Mallalieu, Edward Lancelot
TELLERS FOR THE AYES.—


Hall, George H. (Merthyr Tydvil)
Mander, Geoffrey le M.
Mr. Groves and Mr. John.


NOES.


Adams, Samuel Vyvyan T. (Leeds, W.)
Duncan, James A. L. (Kensington, N.)
Lees-Jones, John


Agnew, Lieut.-Com. P. G.
Eastwood, John Francis
Leighton, Major B. E. P.


Ainsworth, Lieut.-Colonel Charles
Ellis, Sir R. Geoffrey
Lennox-Boyd, A. T


Albery, Irving James
Elliston, Captain George Sampson
Levy, Thomas


Allen, Lt.-Col. J. Sandeman (B'k'nh'd)
Elmley, Viscount
Liddall, Walter S.


Applin, Lieut.-Col. Reginald V. K.
Emmott, Charles E. G. C.
Lindsay. Noel Ker


Bailey, Eric Alfred George
Emrys-Evans, P. V.
Little, Graham-, Sir Ernest


Baldwin, Rt. Hon. Stanley
Erskine, Lord (Weston-super-Mare)
Lloyd, Geoffrey


Banks, Sir Reginald Mitchell
Erskine-Boist, Capt. C. C. (Blackpool)
Locker-Lampson.Rt. Hn. G. (Wd.Gr'n)


Barclay- Harvey, C. M.
Essenhigh, Reginald Clare
Lockwood, John C. (Hackney, C.)


Beaumont, M. W. (Bucks., Aylesbury)
Evans, Capt. Arthur (Cardiff, s.)
Loder, Captain J. de Vere


Beaumont, Hon. R.E.B. (Portsm'th.C.)
Everard, W. Lindsay
Lyons, Abraham Montagu


Bevan, Stuart James (Holborn)
Falle, Sir Bertram G.
MacAndrew, Lt.-Col C. G. (Partick)


Birchall, Major Sir John Dearman
Fielden, Edward Brocklehurst
MacAndrew, Capt. J. 0. (Ayr)


Bird, Ernest Roy (Yorks., Skipton)
Fraser, Captain Ian
McCorquodale), M. S.


Boulton, W. W.
Fremantle, Sir Francis
McKie, John Hamilton


Bowyer, Capt. Sir George E. W.
Galbraith, James Francis Wallace
McLean, Major Sir Alan


Braithwaite, Maj. A. N. (Yorks, E.R.)
Ganzoni, Sir John
McLean, Dr. W. H. (Tradeston)


Braithwaite, J. G. (Hillsborough)
Gibson, Charles Granville
Macquisten, Frederick Alexander


Briscoe, Capt. Richard George
Gledhill, Gilbert
Maitland, Adam


Broadbent, Colonel John
Glossop, C. W. H.
Makins, Brigadier-General Ernest


Brown, Col. D. C. (N'th'I'd., Hexham)
Gluckstein, Louis Halle
Manningham-Buller Lt.-Col. Sir M.


Brown, Brig.-Gen.H.C.(Berks., Newb'y)
Goff, Sir Park
Margesson, Capt. Rt. Hon. H. D. R.


Browne, Captain A. C.
Goldie, Noel B.
Marsden, Commander Arthur


Buchan-Hepburn, P. G. T.
Goodman, Colonel Albert W.
Mayhew. Lieut.-Colonel John


Burghley, Lord
Grenfell, E. C. (City of London)
Moiler, Richard James


Burgin, Dr. Edward Leslie
Gretton, Colonel Rt. Hon. John
Mills, Major J. D. (New Forest)


Burnett, John George
Guest, Capt. Rt. Hon. F. E.
Mitchell, Harold P.(Brtt'd & Chisw'k)


Cadogan, Hon. Edward
Gunston, Captain D. W.
Molson, A. Hugh Elsdale


Campbell, Edward Taswell (Bromley)
Hacking, Rt. Hon. Douglas H.
Monsell, Rt. Hon. Sir B. Eyres


Campbell, Vice-Admiral G. (Burnley)
Hales, Harold K.
Moore-Brabazon, Lieut.-Col. J. T. C.


Campbell-Johnston. Malcolm
Hamilton, Sir George (Ilford)
Morris-Jones, Dr. J. H. (Denbigh)


Caporn, Arthur Cecil
Hanley, Dennis A.
Munro, Patrick


Carver, Major William H.
Hannon, Patrick Joseph Henry
Murray-Phillpson, Hylton Raiph


Castle Stewart, Earl
Harbord, Arthur
Nation, Brigadier-General J. J. H.


Cautley, Sir Henry S.
Hartland, George A.
North, Edward T.


Cayzer, Ma|. Sir H. R. (Prtsmth., S.J
Haslam, Henry (Horncastle)
Nunn, William


Cazalet, Thelma (Islington, E.)
Headlam, Lieut.-Col. Cuthbert M.
O'Connor, Terence James


Chamberlain, Rt. Hon. N.(Edgbaston)
Heilgers, Captain F. F. A.
O'Donovan, Dr. William James


Cobb, Sir Cyril
Heneage, Lieut.-Colonel Arthur P.
O'Neill, Rt. Hon. Sir Hugh


Cochrane, Commander Hon. A. D.
Hepworth, Joseph
Palmer, Francis Noel


Colfox, Major William Philip
Herbert, Capt. S. (Abbey Division)
Penny, Sir George


Colvllle, Lieut.-Colonel j.
Hope, Capt. Hon. A. O. J. (Aston)
Petherick, M.


Conant, R. J. E.
Hore-Belisha, Leslie
Peto, Geoffrey K.(W'verh'pt'n,Bliston)


Courthope, Colonel Sir George L.
Hornby, Frank
Pike, Cecil F.


Croft, Brigadier-General Sir H.
Hudson, Robert Spear (Southport)
Potter, John


Crooke, J. Smedley
Hunter, Capt. M. J. (Brigg)
Powell, Lieut.-Col. Evelyn G. H.


Crookshank, Col.C.de Windt (Bootle)
Iveagh. Countess of
Raikes, Henry V. A. M.


Crookshank, Capt. H. C. (Gainsb'ro)
Jackson, Sir Henry (Wands-vorth, C)
Ramsay, Alexander (W. Bromwich)


Croom.Johnson, R. P.
Jamieson, Douglas
Ramsbotham, Herwald


Cruddas, Lieut.-Colonel Bernard
Jesson, Major Thomas E.
Ramsden, Sir Eugene


Cutverwell, Cyril Tom
Jones, J. J. (West Ham, Silvertown)
Rankin, Robert


Dalkeith, Earl of
Jones. Lewis (Swansea, West)
Reed, Arthur C. (Exeter)


Davison, Sir William Henry
Ker, J. Campbell
Held, Capt. A. Cunningham.


Denman, Hon. R. D.
Kimball, Lawrence
Reid, David D. (County Down)


Drewe, Cedric
Lamb, Sir Joseph Quinton
Remer, John R.


Dugdale, Captain Thomas Lionel
Law, Richard K. (Hull, S.W.)
Rentoul, Sir Gervals S.




Roberts, Sir Samuel (Ecclesall)
Sotheron-Estcourt, Captain T. E.
Ward, Lt.-Col. Sir A. L. (Hull)


Robinson, John Roland
Southby, Commander Archibald R. J.
Ward, Irene Mary Bewick (wallsend;


Ropner, Colonel L.
Speara, Brigadier-General Edward L.
Ward, Sarah Adelaide (Cannock)


Rosbotham, Sir Samuel
Spencer, Captain Richard A.
Wardlaw-Milne, Sir John S.


Ron Taylor, Walter (Woodbridge)
Spent, William Patrick
Warrender, Sir Victor A. G.


Runge, Norah Cecil
Stanley, Hon. O. F. G. (Westmorland)
Waterhouse, Captain Charles


Rutherford, John (Edmonton)
Steel-Malttand, Rt. Hon. Sir Arthur
Wedderburn, Henry James Scrymgeour-


Rutherford, Sir John Hugo (Liverp'l)
Stevenson, James
Wells, Sydney Richard


Salt, Edward W.
Storey, Samuel
Whiteside, Borras Noel H.


Samuel, Sir Arthur Michael (F'nham)
Strauss, Edward A.
Whyte, Jardine Bell


Samuel, Samuel (W'dsworth, Putney)
Strickland, Captain W. F.
Williams, Herbert G. (Croydon, S.)


Sandeman, Sir A. N. Stewart
Stuart, Lord C. Crichton-
Willi, Wilfrid D.


Sanderson, sir Frank Barnard
Sueter, Rear-Admiral Murray F.
Wilson, Clyde T. (West Toxteth)


Scone, Lord
Sugden, Sir Wilfrid Hart
Wilson, G. H. A. (Cambridge U.)


Shaw, Helen B. (Lanark, Bothwell)
Summersby, Charles H.
Windsor-Clive, Lieut.-Colonel George


Shepperson, Sir Ernest W.
Templeton, William P.
Wise, Alfred R.


Slater, John
Thomson, Sir Frederick Charles
Womersley, Walter James


Smiles, Lieut.-Col. Sir Walter D.
Thorp, Linton Theodore



Smith, R. W. (Ab'rd'n & Kinc'dine,C.)
Titchfield, Major the Marquess of
TELLERS FOR THE NOES.-


Smith-Carington, Neville W.
Touche, Gordon Cosmo
Captain Austin Hudson and Major


Somervell, Donald Bradley
Tryon, Rt. Hon. George Clement
George Davies.


Somerville, Annesley A (Windtor)
Vaughan-Morgan, Sir Kenyon

Sir S. CRIPPS: I beg to move, in line 5, after the word "surplus," to insert the words:
(other than any profit or surplus allocated by a society to educational or literary purposes).

Question put, "That those words be there inserted."

The Committee divided: Ayes, 61; Noes, 228.

Division No. 216.]
AYES.
[10.31 p.m.


Asks, Sir Robert William
Grundy, Thomas W.
Mason, David M. (Edinburgh, E.)


Astor. Viscountess (Plymouth. Sutton)
Hall, George H. (Merthyr Tydvil)
Maxton, James


Attlee, Clement Richard
Harris, Sir Percy
Milner, Major James


Batey, Joseph
Hirst, George Henry
Parkinson, John Allen


Bevan, Aneurin (Ebbw Vale)
Holdsworth, Herbert
Price, Gabriel


Briant, Frank
Janner, Barnett
Rathbone. Eleanor


Brown, C. W. E. (Notts., Mansfield)
Jenkins, Sir William
Rea, Walter Russell


Cape, Thomas
John, William
Roberts, Aled (Wrexham)


Cocks, Frederick Seymour
Johnstone, Harcourt (S. Shields)
Salter, Dr. Alfred


Cove, William G.
Jones, Henry Haydn (Merioneth)
Smith, Tom (Normanton)


Cripps, Sir Stafford
Jones, Morgan (Caerphilly)
Tinker, John Joseph


Curry, A. C.
Kirkwood, David
Wallhead, Richard C.


Daggar, George
Lansbury, Rt. Hon. George
White, Henry Graham


Dobble, William
Lawson, John James
Williams, David (Swansea, East)


Edwards. Charles
Leonard, William
Williams, Edward John (Ogmore)


Evans, David Owen (Cardigan)
Logan, David Gilbert
Williams, Thomas (York, Don Vallev)


Evans, Capt. Ernest (Welsh Univ.)
Lunn, William
Wood, Sir Murdoch McKenzie (Banff]


George, Major G. Lloyd (Pembroke)
McEntee, Valentine L.



Graham, D. M. (Lanark, Hamilton)
McGovern, John
TELLERS FOR THE AYES-


Greenwood, Rt. Hon. Arthur
Mainwaring, William Henry
Mr. C. Macdonald and Mr.


Grenfell, David Rees (Glamorgan)
Mallalieu, Edward Lancelot
Groves.


Griffith, F. Kingsley (Middlesbro'.W.)
Mander, Geoffrey le M.



NOES.


Adams, Samuel Vyvyan T. (Leeds, W.)
Burnett, John George
Dalkeith, Earl of


Agnew, Lieut.-Com. P. G.
Cadogan, Hon. Edward
Davits, Ma).Geo. F. (Somerset, Yeovil)


Ainsworth, Lieut.-Colonel Chariot
Campbell, Edward Taswell (Bromley)
Davison, Sir William Henry


Albery, Irving James
Campbell, Vice-Admiral G. (Burnley)
Denman, Hon. R. D.


Allen, Lt.-Col. J.Sandeman (B'k'nh'd)
Campbell-Johnston, Malcolm
Denvilie, Alfred


Applin, Lieut.-Col. Reginald V. K.
Caporn, Arthur Cecil
Drewe, Cedrie


Baldwin, Rt. Hon. Stanley
Carver, Major William H.
Dugdale, Captain Thomas Lionel


Banks, Sir Reginald Mitchell
Castle Stewart, Earl
Duncan, James A. L. (Kensington, N.)


Barclay-Harvey, C- M.
Cautley, Sir Henry S.
Eastwood, John Francis


Beaumont, M. W. (Bucks., Aylesbury)
Cayzer, Ma|. Sir H. R. (Prtsmth., S.)
Ellis, Sir R. Geoffrey


Beaumont, Hon. R.E.B. (Porttm'th.C.)
Cazalet, Thelma (Islington, E.)
Elliston, Captain George Sampson


Bevan, Stuart James (Holborn)
Chamberlain, Rt. Hon. N.(Edgbaston)
Elmley, Viscount


Birchall, Major Sir John Dearman
Cobb, Sir Cyril
Emmott. Charles E. G. C.


Bird, Ernest Roy (Yorks,, Skipton)
Cochrane, Commander Hon. A. D.
Emrys-Evans, P. V.


Boulton, W. W.
Colfox, Major William Philip
Erskine, Lord (Weston-super-Mare)


Bowyer, Capt. Sir George E. W.
Colville. Lieut.-Colonel J.
Erskine-Boist, Capt. C. C. (Bik'pool)


Braithwaite, Ma|. A. N. (Yorks, E. R.)
Conant, R. J. E,
Essenhigh, Reginald Clare


Braithwaite, J. G. (Hillsborough)
Courthope, Colonel Sir George L.
Evans, Capt. Arthur (Cardiff, S.)


Briscoe, Capt. Richard George
Croft, Brigadier-General Sir H.
Everard, w. Lindsay


Broadbent, Colonel John
Crooke, J. Smedley
Falle, Sir Bertram G.


Brown, Col. D. C. (N'thTd, Hexham)
Crookshank, Col. C. de Windt (Bootle)
Fielden, Edward Broeklehurst


Brown, Brig.-Gen.H. C.(Berks., Newb'y)
Crookshank, Capt. H. C. (Gainsb'ro)
Fraser, Captain Ian


Buchan-Hepburn, P. G. T.
Croom-Johnton, R. P.
Fremantle, Sir Francis


Burghley, Lord
Cruddas, Lieut.-Colonel Bernard
Galbraith, James Francis Wallace


Burgin, Dr. Edward Leslie
Culverwell, Cyril Tom
Ganzoni, Sir John


Gibson, Charles Granville
McLean, Major Sir Alan
Samuel, Samuel (W'dsworth, Putney)


Gledhill, Gilbert
McLean, Or. W. H. (Tradeaton)
Sandeman, Sir A. N. Stewart


Glossop, C. W. H.
Macquisten, Frederick Alexander
Sanderson, Sir Frank Barnard


Gluckstein. Louis Halle
Maitland, Adam
Scone, Lord


Golf, Sir Park
Makins, Brigadier-General Ernest
Shaw, Helen B. (Lanark, Both well)


Goldie, Noel B.
Manningham-Buller, Lt.-Col. Sir M.
Shepperson, Sir Ernest W.


Goodman, Colonel Albert w.
Margeason, Capt. Rt. Hon. H. D. R.
Slater, John


Grenfell, E. C (City of London)
Marsden, Commander Arthur
Smiles, Lieut.-Col. Sir Walter D.


Gretton, Colonel Rt. Hon. John
Martin, Thomas B.
Smith. R. W. (Aberd'n & Kinc'dine, C.)


Guest, Capt. Rt. Hon. F. E.
Mayhew, Lieut.-Colonel John
Smith-Carington, Neville W.


Gunston, Captain D. W.
Meller, Richard James
Somervell, Donald Bradley


Hacking, Rt. Hon. Douglas H.
Mills, Major J. D. (New Forest)
Somerville, Annesley A. (Windsor)


Hales, Harold K.
Molson, A. Hugh Elsdale
Sot heron. Estcourt, Captain T. E.


Hamilton, Sir George (Ilford)
Monsell, Rt. Hon. Sir B. Eyres
Southby, Commander Archibald R. J.


Hanley, Dennis A.
Moore-Brabazon, Lieut.-Col. J. T. C.
Spears, Brigadier-General Edward L.


Harmon, Patrick Joseph Henry
Morris-Jones, Dr. J. H. (Denbigh)
Spencer, Captain Richard A.


Harbord, Arthur
Munro, Patrick
Spans, William Patrick


Harvey, George (Lambeth,Kenningt'n)
Murray-Phillpson, Hylton Raiph
Stanley, Hon. O. F. G. (Westmorland)


Haslam, Henry (Horncastle)
Nation, Brigadier-General J. J. H.
Steel-Maitland, Rt. Hon. Sir Arthur


Headlam, Lieut.-Col. Cuthbert M.
Nicholson, Godfrey (Morpeth)
Stevenson, Jamea


Heilgers, Captain F. F. A.
North, Edward T.
Storey, Samuel


Heneage, Lieut.-Colonel Arthur P.
Nunn, William
Strauss, Edward A.


Hepworth, Joseph
O'Connor, Terence James
Strickland, Captain W. F.


Herbert, Capt. S. (Abbey Divison)
O'Donovan, Dr. William James
Stuart, Lord C. Crichton-


Hope, Capt. Hon. A. O. J. (Aston)
O'Neill, Rt. Hon. Sir Hugh
Sueter, Rear-Admiral Murray F.


Hore-Belisha, Leslie
Palmer, Francis Noel
Sugden, Sir Wilfrid Hart


Hornby, Frank
Penny, Sir George
Summersby, Charles H.


Hudson, Robert Spear (Southport)
Petherick. M.
Templeton. William P.


Hunter, Capt. M. J. (Brigg)
Peto, Geoffrey K.(W'verh'pt'n,Bilst'n)
Thomson, Sir Frederick Charles


Iveagh, Countess of
Pike, Cecil F.
Thorp. Linton Theodore


Jackson, Sir Henry (Wandsworth, C.)
Potter, John
Titchfield, Major the Marquess of


Jamieson, Douglas
Powell, Lieut.-Col. Evelyn G. H.
Touche, Gordon Cosmo


Jesson, Major Thomas E.
Raikea. Henry V. A. M.
Tryon, Rt. Hon. George Clement


Jones, Lewis (Swansea, West)
Ramsay, Alexander (W. Bromwich)
vaughan-Morqan, Sir Kenyon


Ker, J. Campbell
Ramsbotham, Herwald
Ward, Lt.-Col. Sir A. L, (Hull)


Kimball, Lawrence
Ramaden, Sir Eugene
Ward, Irene Mary Bewick (Wallsend)


Lamb, Sir Joseph Quinton
Rankin, Robert
Ward, Sarah Adelaide (Cannock)


Law, Richard K. (Hull, S.W.)
Reed, Arthur C. (Exeter)
Ward law-Milne, Sir John S.


Leighton, Major B. E. P.
Reid, Capt. A. Cunningham.
Warrender. Sir Victor A. G.


Lennox-Boyd, A. T.
Reid, David D. (County Down)
Waterhouse, Captain Charles


Levy, Thomas
Remer, John R.
Wells, Sydney Richard


Liddall, Walter S.
Rentoul, Sir Gervals S.
Whiteside, Borras Noel H.


Lindsay, Noel Ker
Roberts, Sir Samuel (Ecclesall)
Whyte, Jardine Bell


Little, Graham-, Sir Ernest
Robinson, John Roland
Williams, Herbert G. (Croydon, S.)


Lloyd, Geoffrey
Ropner, Colonel L.
Wills. Wilfrid D.


Lockwood, John C. (Hackney, C.)
Rosbotham, Sir Samuel
Wilson, Clyde T. (West Toxteth)


Loder, Captain J. de Vera
Ross Taylor, Waiter (Woodbridge)
Wilson, G. H. A. (Cambridge U.)


Lyons, Abraham Montagu
Runge, Norah Cecil
Windsor-Clive, Lieut.-Colonel George


MacAndrew, Lieut.-Col. C. G.(Partick)
Rutherford, John (Edmonton)
wise, Alfred R.


MacAndrew, Capt. J. O. (Ayr)
Rutherford, Sir John Hugo (Liverp'l)



McCorquodalt, M. S.
Salt, Edward w.
TELLERS FOR THE NOES—


McKie, John Hamilton
Samuel, Sir Arthur Michael (F'nham)
Captain Austin Hudson and Mr. Womersley.

Sir S. CRIPPS: I beg to move, in line 5, after the word "surplus," to insert the words:
(other than any profit or surplus allocated by a society on the direction or its members to industrial relief).

Question put, "That those words be there inserted."

The Committee divided: Ayes, 63; Noes, 232.

Division No. 217.]
AYES.
[10.40 p.m.


Aske, Sir Robert William
Groves, Thomas E.
Mallalieu. Edward Lancelot


Astor, Viscountess (Plymouth, Sutton)
Grundy, Thomas W.
Mander, Geoffrey le M.


Attlee, Clement Richard
Hall, George H. (Merthyr Tydvil)
Mason, David M. (Edinburgh, E.)


Batey, Joseph
Harria, Sir Percy
Maxton, James


Bevan, Aneurin (Ebbw Vale)
Hirst, George Henry
Milner, Major James


Briant, Frank
Holdsworth, Herbert
Parkinson, John Allen


Brown, C. W. E. (Notts., Mansfield)
Janner, Barnett
Price. Gabriel


Cape, Thomas
Jenkins, Sir William
Rathbone, Eleanor


Cocks, Frederick Seymour
Johnstone, Harcourt (S. Shields)
Rea, Walter Russell


Cove, William G.
Jonee, Henry Haydn (Merioneth)
Roberts, Aled (Wrexham)


Cripps, Sir Stafford
Jones, Morgan (Caerphilly)
Salter, Dr. Alfred


Curry, A. C.
Kirkwood, David
Smith, Tom (Normanton)


Daggar, George
Lansbury, Rt. Hon. George
Tinker, John Joseph


Dobbie, William
Lawson, John James
Wallhead, Richard C.


Edwards, Charles
Leonard, William
White, Henry Graham


Evans, David Owen (Cardigan)
Logan, David Gilbert
Williams, David (Swansea, East)


Evans, Capt. Ernest (Welsh Univ.)
Lovat-Fraser, James Alexander
Williams, Edward John (Ogmora)


George, Major G. Lloyd (Pembroke)
Lunn, William
Williams, Thomas (York. Don Valley)


Graham, D. M. (Lanark, Hamilton)
McEntee, Valentine L.
Wood, Sir Murdoch McKenzie (Banff)


Greenwood, Rt. Hon. Arthur
McGovern, John



Grenfell, David Rees (Glamorgan)
Maclay, Hon. Joseph Paton
TELLERS FOR THE AYES —


Griffith, F. Kingsley (Middiesbro', W.)
Mainwaring, William Henry
Mr. C. Macdonald and Mr. John.


Adams, Samuel Vyvyan T. (Leeds, W.)
Golf, Sir Park
Petherick, M


Agnew, Lieut.-Com. P. G.
Goldie, Noel B.
Peto, Geoffrey K. (W'verh'pt'n, Blist'n)


Ainsworth, Lieut.-Colonel Charles
Goodman, Colonel Albert W.
Pike, Cecil F.


Albery, Irving James
Granted, E. C. (City of London)
Potter, John


Allen, Lt.-Col. J. Sandeman (B'k'nh'd.)
Gretton, Colonel Rt. Hon. John
Powell, Lieut.-Col. Evelyn G. H.


Applin, Lieut.-Col. Reginald V. K.
Grimston, R. V.
Raikes, Henry V. A. M.


Bailey, Eric Alfred George
Guest, Capt. Rt. Hon. F. E.
Ramsay, Alexander (W. Bromwich)


Baldwin, Rt. Hon. Stanley
Gunston, Captain D. W.
Ramsay, Capt. A. H. M. (Midlothian)


Banks, Sir Reginald Mitchell
Hacking. Rt. Hon. Douglas H.
Ramsbotham, Herwald


Barclay.Harvey, C. M.
Hales, Harold K.
Ramsden, Sir Eugene


Bateman, A. L.
Hamilton, Sir George (Ilford)
Rankin, Robert


Beaumont, M. W. [Bucks., Aylesbury)
Hanley, Dennis A.
Reed, Arthur C. (Exeter)


Beaumont, Hn. R. E. B. (Portsm'th, C.)
Hannon, Patrick Joseph Henry
Held, Capt. A. Cunningham-


Bevan, Stuart James (Holborn)
Harbord, Arthur
Held, David D. (County Down)


Birchall, Major Sir John Dearman
Hart land, George A.
Remer, John R.


Bird, Ernest Roy (Yorks., Skipton)
Harvey, George (Lambeth. Kenningt'n)
Rentoul, Sir Gervals S.


Boulton, W. W.
Haslam, Henry (Horncastte)
Roberts, Sir Samuel (Ecclesall)


Braithwaite, Maj. A. N. (Yorks. E. R.)
Headlam, Lieut.-Col. Cuthbert M.
Robinson, John Roland


Braithwaite, J. G. (Hillsborough)
Heilgers. Captain F. F. A.
Ropner, Colonel L.


Briscoe, Capt. Richard George
Heneage, Lieut.-Colonel Arthur P.
Rosbotham, Sir Samuel


Broadbent, Colonel John
Hepworth, Joseph
Ross Taylor, Walter (Woodbridger


Brown.Col. D. C. (N'th'I'd., Hexham)
Herbert, Capt. S. (Abbey Division)
Runge, Norah Cecil


Brown, Brig.-Gen.H.C.(Berks.Newb'y)
Hope, Capt. Hon. A. O. J. (Aston)
Rutherford, John (Edmonton)


Buchan-Hepburn, P. G. T.
Hore-Belisha, Leslie
Rutherford, Sir John Hugo (Liverp'l)'


Burghley, Lord
Hornby, Frank
salt, Edward W.


Burgin, Dr. Edward Leslie
Hudson, Capt. A. U. M.(Hackney,N.)
Samuel, Sir Arthur Michael (F'nhamK


Burnett, John George
Hudson, Robert Spear (Southport)
Samuel, Samuel (W'dsworth, Putney)


Cadogan, Hon. Edward
Hunter, Capt. M. J. (Brigg)
Sandeman, Sir A. N. Stewart


Campbell, Edward Taswell (Bromley)
Iveagh, Countess of
Sanderson, Sir Frank Barnard


Campbell, vice-Admiral G. (Burnley)
Jackson, Sir Henry (Wandsworth, C.)
Scone, Lord


Campbell-Johnston, Malcolm
Jamieson, Douglas
Shaw, Helen B. (Lanark, Bothwell)


Caporn, Arthur Cecil
Jesson, Major Thomas E.
Shepperson, Sir Ernest W.


Carver, Major William H.
Jones, Lewis (Swansea, West)
Slater, John


Castle Stewart, Earl
Ker, J. Campbell
Smiles. Lieut.-Col. Sir Walter D.


Cautley, Sir Henry S.
Kimball, Lawrence
Smith, R. W. (Ab'rd'n' & Kinc'dine, C.)


Cayzer. Maj. Sir H. R. (Prtsmth., S.)
Lamb, Sir Joseph Quinton
Smith-Carington, Neville W.


Cazalet, Thelma (Islington, E.)
Law, Richard K. (Hull, S.W.)
Somervell, Donald Bradley


Chamberlain, Rt. Hon. N. (Edgbaston)
Lees-Jones, John
Somerville, Annesley A. (Windsor)


Cobb, Sir Cyril
Leighton, Major B. E. P.
Sotheron-Estcourt, Captain T. E.


Cochrane, Commander Hon. A. D.
Lennox-Boyd, A. T.
Southby, Commander Archibald R. J.


Colfox, Major William Philip
Levy, Thomas
Spears, Brigadier-General Edward L.


Colville, Lieut.-Colonel J.
Liddall, Walter S.
Spencer, Captain Richard A.


Conant, R, J. E.
Lindsay, Noel Ker
Spens, William Patrick


Courthope, Colonel Sir George L.
Little, Graham-, Sir Ernest
Stanley Hon. O, F. G. (Westmorland)


Crolt, Brigadier-General Sir H.
Liewellin, Major John J.
Steel-Maitland, Rt. Hon. Sir Arthur


Crooke, J. Smedley
Lloyd, Geoffrey
Stevenson, James


Crookshank, Col. C. de Windt (Bootle)
Lockwood, John C. (Hackney, C.)
Storey, Samuel


Crookshank. Capt. H. C. (Gainsti'ro)
Loder, Captain J. de Vera
Strauss, Edward A.


Croom-Johnson, R. P.
Lyons. Abraham Montagu
Strickland, Captain W. F.


Cruddas, Lieut.-Colonel Bernard
MacAndrew, Lt.-Col. C. G. (Partick)
Stuart, Lord C. Crichton-


Culverwell, Cyril Tom
MacAndrew, Capt. J. O. (Ayr)
Sueter, Rear-Admiral Murray F.


Dalkeith, Earl of
McCorquodale, M. S.
Sugden, Sir Wilfrid Hart


Davies, Maj. Geo. F.(Somerset, Yeovil)
McKie, John Hamilton
Summersby, Charles H.


Denman, Hon. R. D
McLoan, Major Sir Alan
Templeton, William P.


Denville. Alfred
McLoan, Dr. W. H. (Tradeston)
Thomson, Sir Frederick Charles


Drews, Cedric
Macquisten, Frederick Alexander
Thorp, Linton Theodore


Dugdale, Captain Thomas Lionel
Maitland, Adam
Titchfield, Major the Marquess of


Duncan, James A. L. {Kensington, N.)
Makins, Brigadier-General Ernest
Touche, Gordon Cosmo


Eastwood, John Francis
Manningham-Buller, Lt.-Col. Sir M.
Tryon, Rt. Hon. George Clement


Ellis, Sir R. Geoffrey
Margesson, Capt. Rt. Hon. H. D, R.
Vaughan-Morgan, Sir Kenyon


Elliston, Captain George Sampson
Marsden, Commander Arthur
Ward, Lt.-Col. Sir A. L. (Hull)


Elmley, Viscount
Martin, Thomas B.
Ward, Irene Mary Bewick (Wallsend)


Emmott, Charles E. G. C.
Mayhew, Lieut.-Colonel John
Ward, Sarah Adelaide (Cannock)


Emrys-Evans. P. V.
Meller, Richard James
Wardlaw-Milne, Sir John S.


Erskine, Lord (Weston-super-Mare)
Mills, Major J. D. (New Forest)
Warrender, Sir Victor A. G.


Erskine-Boist. Capt. C. C. (Blackpool)
Molson, A. Hugh Elsdale
Waterhouse, Captain Charles


Essenhigh, Reginald Clare
Monsell, Rt. Hon. Sir B. Eyres
Wells. Sydney Richard


Evans, Capt. Arthur (Cardiff, S.)
Moore-Brabazon, Lieut.-Col. J. T. C.
Whiteside, Borras Noel H.


Everard, W. Lindsay
Munro, Patrick
Whyte, Jardine Ball


Falle, Sir Bertram G.
Murray-Phillpson, Hylton Raiph
Williams,. Herbert. G. (Croydon, S.)


Fielden, Edward Brocklehurst
Nation, Brigadier-General J. J. H.
Wills, Wilfrid D.


Fraser, Captain Ian
Nicholson, Godfrey (Morpeth)
Wilson, Clyde T. (West Toxteth)


Fremantle, Sir FrancTs
North, Edward T.
Wilson, G. H. A. (Cambridge U.)


Galbraith, James Francis Wallace
Nunn, William
Windsor-Clive, Lieut-Colonel George


Ganzoni, Sir John
O'Connor, Terence James
Wise, Alfred R.


Gibson, Charles Granville
O'Donovan, Dr. William James
Womersley, Walter James


Gledhill, Gilbert
O'Neill, Rt. Hon. Sir Hugh



Glossop, C. W. H.
Palmer, Francis Noel
TELLERS FOR THE NOES.—


Gluckstein, Louis Halle
Penny, Sir George
Captain Sir George Bowyer and Dr. Morris- Jones.

10.48 p.m.

Mr. GEORGE HALL: I beg to move, in line 11, at the end, to insert the words:
Provided that in the case of registered societies the charge to tax in respect of such profit or surplus shall not exceed one-tenth of the standard rate.
If I take very little time in moving the Amendment, I trust that the Chancellor of the Exchequer will not think that we attach very little importance to it. We regard it as an Amendment of some substance. The surplus in mutual trading is not of its own nature a profit of trade, and this is admitted by the Chancellor of the Exchequer, because he has found it necessary in Sub-section (1) of this Clause to deal with mutual surpluses by express enactment. It is only the undistributed portion of a mutual surplus which is to be deemed to be profit for Income Tax purposes.

The CHAIRMAN: Order. I must ask hon. Members to allow the hon. Member to be heard.

Mr. HALL: I was endeavouring to point out that if at any time this undistributed portion of the surplus is withdrawn from reserve and paid out to shareholders, it will, as the law stands at present, become taxable income in their hands. As, however, the money will already have been taxed when placed to reserve, this will mean double taxation upon that money. Moreover, it is estimated that not more than 10 per cent. of the members of co-operative societies are liable to Income Tax. It is therefore reasonable to ask that one-tenth of the undistributed surplus of the societies should bear tax at the standard rate and that nine-tenths should be excluded from taxation. For convenience in calculating the tax in this way, our Amendment proposes to tax the whole of the undistributed surplus at one-tenth of the standard rate. Under the Clause as it stands, 90 per cent. of the members of the co-operative societies would be called upon to pay a sum in Income Tax which, however small it might be, they ought not to be called upon to pay. The Financial Secretary to the Treasury, in moving this Clause this afternoon, referred to the co-operative societies as rich co-operative corporations. That is not so. The cooperative societies are really groups of poor persons, and that can be proved by
the fact that only 10 per cent. of the 6,000,000 or 7,000,000 members of cooperative societies in this country are liable to Income Tax at all, because their incomes are still below the Income Tax limit. It is true that some of the richer societies, such as the London Society or the Woolwich Society, will feel the effects of the tax, but it is the poorer societies in the distressed areas on which the burden will fall the heaviest.
Let met put the case of the distressed areas, especially such districts as Durham, Northumberland or South Wales, in which the societies were very prosperous before the depression came and the members, instead of taking out their dividends, allowed them to accumulate and form share Capttal. During the last eight or ten years, owing to the depression, these societies have unfortunately been faced with considerable financial difficulties. In a number of cases the Co-operative Wholesale Society has had to take them under supervision and to write down a large amount of the share Capttal, which is really dividends of the members which have been allowed to accumulate. In some cases the pound share has been written down to three or four shillings. Instead then of paying the full amount of the dividend to the members, they have been setting aside a certain amount of the surplus towards a fund called a redemption fund. Under this new Clause, the dividends set aside as redemption fund to redeem the portion of the share Capttal of the members which has been lost will be liable to bear this tax of 5s. in the £.
Let me put the case of a society in my own division. It was a very old society which unfortunately fell on bad days financially and was absorbed by a financially stronger society. The share Capttal of the older society was written down from £l to Vs., but the new amalgamated society pledged the members of the now combined societies that, out of the surplus, a redemption fund would be formed to pay the difference between the 7s. and the full 20s. There was a sum of £30,000 involved and out of that £20,000 has been repaid through this redemption fund. There is another £10,000 outstanding, and it is the intention of the amalgamated society out of the surplus, instead of paying dividends, to redeem this £10,000 of share Capttal which has been lost. According to the new Clause, that
£10,000 which will be set aside out of the surplus from the purchases of members, although it is unpaid dividends, will have to bear a tax of 5s. in the pound. Societies of that kind would benefit by a proposal such as that contained in the Amendment.

10.56 p.m.

Mr. CHAMBERLAIN: I think that it must be obvious that there is, in fact, as the hon. Member says, a good deal of substance in the Amendment for there is very little difference between it and a proposal to relieve altogether the surpluses of societies from tax. The only thing that we are proposing to tax is the surpluses of societies, and the hon. Member is now coolly moving to reduce the tax to one-tenth. In other words, he claims the exemption of co-operative societies from taxation, and he cannot expect me to accept the Amendment. I should like, howover, to remove a misapprehension to which he fell a victim in presenting his case. In order to support his proposal that societies should be taxed at only one-tenth of the rate that ordinary company surpluses are taxed, he said that if these surpluses were used to pay interest on share Capttal at some future date there would be double taxation, inasmuch as the societies would have first paid tax on the reserves, and subsequently the shareholder would have to pay tax.

Mr. HALL: I may not have made the point as clear as I should have done. My point was that these surpluses would be taxed, but, if at any time the surpluses were paid out to the shareholders or the members, the shareholders or the members would also be liable to tax, and that therefore there would be double taxation.

Mr. CHAMBERLAIN: That is exactly what I was saying. The hon. Member said that first of all the surpluses would be taxed when put to reserve, and second, that the part of the reserves paid to the shareholders would be taxed again. He does not seem to realise that there is no double taxation here. If he will look at the new Clause that we are going to discuss after we have finished this Clause, in Sub-section (4), he will see that
a registered society shall be entitled to have the amount of Income Tax which, but for any relief under this paragraph, it would be liable ultimately to bear for any year of assessment, reduced by a sum representing tax on the amount of share interest or loan interest paid in that year by the society without deduction of tax in accordance with the foregoing provisions of this section.
So there is no double taxation. The same thing happens in the case of co-operative societies as in the case of a trading company. If a trading company makes a profit and does not distribute the whole of it, but puts part to reserve, it is taxed on that profit. If that company pays part of that reserve away in dividends to the shareholders, the shareholders will have the tax deducted by the company before it comes to them, but, of course, the company is not then liable twice over, In the same way, if part of a society's surplus is subsequently paid away as share interest, the society will be relieved of tax upon that share interest. Consequently, there will be no double taxation. That part of the hon. Gentleman's case, therefore, falls to the ground.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 57; Noes, 223.

Division No. 218.]
AYES.
[11.0 p.m.


Aske. Sir Robert William
Harris, Sir Percy
Mander, Geoffrey to M.


Attlee, Clement Richard
Hirst. George Henry
Mason, David M. (Edinburgh, E.)


Batey, Joseph
Holdsworth, Herbert
Maxton, James


Sevan, Aneurin (Ebbw Vale)
Janner, Barnett
Milner, Major James


Briant, Frank
Jenkins, Sir William
Nathan, Major H. L.


Brown, C. W. E. (Notts., Mansfield)
Johnstone, Harcourt (S. Shields)
Parkinson,. John Allen


Cape, Thomas
Jones, Henry Haydn (Merioneth)
Price, Gabriel


Cocks, Frederick Seymour
Jones, Morgan (Caerphilly)
Rathbone, Eleanor


Cripps, Sir Stafford
Kirkwood, David
Rea, Walter Russell


Curry, A. C.
Lansbury, Rt. Hon. George
Roberts, Aled (Wrexham)


Daggar, George
Lawson, John James
Smith, Tom (Normanton)


Dobble, William
Leonard, William
Tinker, John Joseph


Edwards, Charles
Logan, David Gilbert
White, Henry Graham


Evans, Capt. Ernest (Welsh Univ.)
Lovat-Fraser, James Alexander
Williams, David (Swansea, East)


Graham, D. M. (Lanark, Hamilton)
Lunn, William
Williams, Edward John (Ogmore)


Greenwood, Rt. Hon. Arthur
Macdonald, Gordon (Ince)
Williams, Thomas (York, Don Valley)


Grenfell, David (tees (Glamorgan)
McEntee, Valentine L.
Wood, Sir Murdoch McKenzie (Banff)


Griffith, F. Kingsley (Middlesbro'.W.)
McGovern. John



Grundy, Thomas W.
Mainwaring, William Henry
TELLERS FOR THE AYES.—


Hall, George H. (Merthyr Tydvil)
Mallelieu, Edward Lancelot
Mr. John and Mr. Groves.


NOES.


Adams, Samuel Vyvyan T. (Leads, W.)
Goodman, Colonel Albert W.
Peto, Geoffrey K.(W'verh'pt'n, Bliston)


Agnew, Lieut.-Com. P. G.
Grenfell, E. C. (City of London)
Pike, Cecil F.


Ainsworth, Lieut.-Colonel Charles
Gretton, Colonel Rt. Hon. John
Potter, John


Albery, Irving James
Grimston, R. V.
Powell, Lieut.-Col. Evelyn G. H


Allen, Lt.-Col. J. Sandeman (B'k'nh'd.)
Guest, Capt. Rt. Hon. F. E.
Raikes, Henry V. A. M.


Bailey, Eric Alfred George
Gunston, Captain D. W.
Ramsay, Alexander (W. Bromwich)


Baldwin, Rt. Hon. Stanley
Hacking, Rt. Hon. Douglas H.
Ramsden, Sir Eugene


Banks, Sir Reginald Mitchell
Hales, Harold K.
Rankin, Robert


Barclay-Harvey, C. M,
Hamilton, Sir George (Ilford)
Reed, Arthur C. (Exeter)


Bateman, A. L.
Hammersley, Samuel S.
Held, Capt. A. Cunningham-


Beaumont, M. W. (Bucks., Aylesbury)
Hanley, Dennis A.
Reid, David D. (County Down)


Beaumont, Hon. R.E.B. (Portsm'th,C.)
Hannon, Patrick Joseph Henry
Remer, John R.


Bevan, Stuart James (Holborn)
Harbord, Arthur
Roberts, Sir Samuel (Ecclesall)


Birchall, Major Sir John Dear man
Harvey, George (Lambeth, Kenningt'o)
Robinson, John Roland


Bird, Ernest Roy (Yorks., Skipton)
Haslam, Henry (Horncastle)
Ropner, Colonel L,


Boulton, W. w.
Haslam, Sir John (Bolton)
Rosbotham, Sir Samuel


Bowyer. Capt. Sir George E. W.
Headlam, Lieut.-Col. Cuthbert M.
Rots Taylor, Walter (Woodbridge)


Braithwaite, Maj. A. N. (Yorks, E.R.)
Heilgers, Captain F. F. A.
Runge, Norah Cecil


Braithwaite, J. G. (Hillsborough)
Heneage, Lieut.-Colonel Arthur P
Rutherford, Sir John Hugo (Liverp'l)


Briscoe, Capt. Richard George
Hepworth, Joseph
Salmon, Sir Isidore


Broadbent, Colonel John
Herbert, Capt. S. (Abbey Division
Salt, Edward W.


Brown, Col. D. C. (N'th'I'd., Hexham)
Hope, Capt. Hon. A. O. J. (Aston)
Samuel, Sir Arthur Michael (F'nham)


Brown, Brig.-G en. H.C.(Berks. Newb'y)
Hore-Belisha, Leslie
Samuel, Samuel (W'dsworth, Putney)


Buchan-Hepburn, P. G. T
Hornby, Frank
Sandeman, Sir A. N. Stewart


Burghley, Lord
Howard, Tom Forrest
Sanderson, Sir Frank Barnard


Burg In, Dr. Edward Leslie
Hudson, Robert Spear (Southport)
Scone, Lord


Burnett. John George
Hunter, Capt. M. J. (Brigg)
Shaw, Helen B. (Lanark, Bothwell)


Campbell, Edward Taswell (Bromley)
Inskip, Rt. Hon. Sir Thomas W. H.
Shepperson, Sir Ernest W.


Campbell, Vice-Admiral G. (Burnley)
Iveagh, Countess of
Skelton, Archibald Noel


Campbell-Johnston, Malcolm
Jackson, Sir Henry (Wandsworth, C.)
Slater, John


Caporn, Arthur Cecil
Jamisson, Douglas
Smith, R. W. (Aberd'n & Kinc'dine.C.)


Carver, Major William H.
Jesson, Major Thomas E.
Smith-Carington, Neville W.


Cautley, Sir Henry S.
Jones, Lewis (Swansea, West)
Somervell, Donald Bradley


Cayzer, Maj. Sir H. R. (Prtsmth., S.)
Ker, J. Campbell
Sotheron-Estcourt, Captain T. E.


Cazalet, Thelma (Islington, E.)
Kimball, Lawrence
Southby, Commander Archibald R. J.


Chamberlain, Rt. Hon. N.(Edgbaston)
Lamb, Sir Joseph Quinton
Spears, Brigadier-General Edward L.


Cobb, Sir Cyril
Law. Richard K. (Hull. S.W.)
Spencer, Captain Richard A.


Cochrane, Commander Hon. A. D.
Leighton, Major B. E. P.
Spens, William Patrick


Colfox, Major William Philip
Lennox-Boyd, A. T.
Stanley, Hon. O. F. G. (Westmorland)


Colville, Lieut.-Colonel J.
Levy, Thomas
Steel-Maitland, Rt. Hon. Sir Arthur


Conant, R. J. E.
Liddall. Walter S.
Stevenson, James


Courthope, Colonel Sir George L.
Lindsay. Noel Ker
Storey, Samuel


Croft, Brigadier-General Sir H.
Little, Graham-, Sir Ernest
Strauss, Edward A.


Crooke, J. Smedley
Lloyd, Geoffrey
Strickland, Captain W. F.


Crookshank, Col. C. de Windt (Bootle)
Lockwood, John C. (Hackney, C.)
Stuart, Lord C. Crichton-


Crookshank, Capt. H. C. (Gainsb'ro)
Loder, Captain J. de Vere
Sueter, Rear-Admiral Murray F.


Croom-Johnson, R. P.
Lyons, Abraham Montagu
Sugden, Sir Wilfrid Hart


Cruddas, Lieut.-Colonel Bernard
MacAndrew, Lieut.-Col. C. G. (Partick)
Summersby, Charles H.


Culverwell, Cyril Tom
MacAndrew, Capt. J. O. (Ayr)
Templeton. William P.


Dalkeith, Earl of
McKie, John Hamilton
Thomas, James P. L. (Hereford)


Davies, Maj. Geo. F.(Somerset, Yeovil)
McLean, Major Sir Alan
Thompson, Luke


Denville. Alfred
McLean, Dr. W. H. (Tradeston)
Thomson, Sir Frederick Charles


Drewe, Cedric
Macmillan, Maurice Harold
Thorp, Linton Theodore


Dugdale, Captain Thomas Lionel
Macquisten, Frederick Alexander
Titchfield, Major the Marquess of


Duncan, James A. L. (Kensington, N.)
Makins, Brigadier-General Ernest
Touche, Gordon Cosmo


Eastwood, John Francis
Manningham-Bullar, Lt.-Col. Sir M.
Tryon, Rt. Hon. George Clement


Ellis, Sir R. Geoffrey
Margesson, Capt. Rt. Hon. H. D. R,
Vaughan-Morgan, Sir Kenyon


Elliston, Captain George Sampson
Marsden, Commander Arthur
Ward, Lt.-Col. Sir A. L. (Hull)


Elmley, Viscount
May hew, Lieut.-Colonel John
Ward, Irene Mary Bewick (Wallsend)


Emrys-Evans, P. V.
Mills, Major J. D. (New Forest)
Ward, Sarah Adelaide (Cannock)


Erskine, Lord (Weston-super-Mare)
Molson. A. Hugh Elsdale
Warrender, Sir Victor A. G.


Erskine-Boist. Capt. C. C. (Blackpool)
Monsell, Rt. Hon. Sir B. Eyres
Wells, Sydney Richard


Essenhigh, Reginald Clare
Moore-Brabazon, Lieut.-Col. J. T. C.
Whiteside, Borras Noel H.


Evans. Capt. Arthur (Cardiff, S.)
Munro, Patrick
Whyte, Jardine Bell


Everard, W. Lindsay
Murray-Phillpson, Hylton Raiph
Williams, Herbert G. (Croydon, S.)


Falle Sir Bertram G.
Nail. Sir Joseph
Wills. Wilfrid D.


Fielden, Edward Brocklehurst
Nation, Brigadier-General J. J. H.
Wilson, Clyde T. (West Toxteth)


Fraser, Captain Ian
North, Edward T.
Wilson, G. H. A. (Cambridge U.)


Fremantle. Sir Francis
O'Connor, Terence James
Windsor-Clive, Lieut.-Colonel George


Gibson. Charles Granville
O'Donovan, Dr. William James
Wise. Alfred R.


Gledhill, Gilbert
O'Neill. Rt. Hon. Sir Hugh
Womersley, Walter James


Glossop, C. W. H.
Ormsby-Gore, Rt. Hon. William G.A.



Gluckstein, Louis Halle
Palmer. Francis Noel
TELLERS FOR THE NOES.—


Goff, Sir Park
Penny, Sir George
Captain Austin Hudson and Dr.


Goldie, Noel B.
Petherick, M.
Morris-Jones.


Question, "That the Clause be read a Second time," put, and agreed to.

11.8 p.m.

Mr. MABANE: I beg to move, in line 14, at the end, to insert the words:
except in the case of societies the rules of which include specific provisions to the effect
that, after payment of interest at the rate of not more than 5 per cent. on the shares of members and deduction of all allowable trading expenses, any surplus remaining at the end of each year's trading shall be granted to the members as discount, rebate,
dividend, or bonus in proportion to the magnitude of their transactions with the society during the year to which the surplus relates.
It would appear, from a careful reading of Sub-section (3) of the new Clause, that it does precisely what my Amendment suggests, namely, if societies include in their rules provision that the surplus that remains at the end of any year's trading belongs to the members and should be distributed to them, they are exempt from taxation. If the Chancellor of the Exchequer can tell me that the Sub-section and my Amendment have the same object, I cannot see any purpose in pressing the Amendment. I feel a certain sense of grievance against the Chancellor, because last Wednesday, when I suggested that the proper way to tackle this was to make it plain that societies who so organise their affairs that the surplus belonged absolutely to the members as traders, he told me that it was impracticable; yet the Clause which he proposes includes that provision. If I were assured that my Amendment is virtually the same as Sub-section (3), I would be very glad to withdraw it.

11.10 p.m.

Mr. CHAMBERLAIN: My hon. Friend is mistaken in supposing that I told him that his proposal was impracticable; it was the hon. Member for Gorbals (Mr. Buchanan) who told him that it was impracticable. The Amendment provides that, if any portion of the surplus were retained for reserve or for any other purpose, it would be immediately excluded from the benefit of the Clause: but, if the rules were complied with and there was no surplus, everything being distributed as "divi," then my hon. Friend's Amendment would give him no more than is provided by my Clause.

Amendment, by leave, withdrawn.

NEW CLAUSE.—(Payment of loan and share interest of registered societies without deduction of tax.)

(1) Notwithstanding anything Contained in the Income Tax Acts, any share interest or loan interest paid by a registered society shall be paid without deduction of income tax:

Provided that this Sub-section—

(a) shall not apply to any share interest or loan interest payable to a person whose usual place of abode is not within the United Kingdom; and
(b) shall not render improper any such deduction made before the first day of October, nineteen hundred and thirty-three, which would have been a proper deduction if this Sub-section had not been enacted.

(2) Any share interest or loan interest paid by a registered society without deduction of income tax shall be chargeable under Case III of Schedule D as if it were mentioned in Rule 1 of the rules applicable to that Case.

(3) Where at any time, by virtue of the last foregoing Sub-section, the income of a person from any source becomes chargeable as therein provided not having previously been chargeable by direct assessment on that person, the provisions of paragraph (ii) of the proviso to Section thirty of the Finance Act, 1926 (which relates to charge of tax where a person acquires a new source of income in any year of assessment) shall apply as if the source of that income were a new source of income acquired by that person at that time.

(4) Subject as hereinafter provided—

(a) a registered society shall be entitled to have the amount of income tax which, but for any relief under this paragraph, it would be liable ultimately to bear for any year of assessment, reduced by a sum representing tax on the amount of share interest or loan interest paid in that year by the society without deduction of tax in accordance with the foregoing provisions of this Section; and
(b) where due relief under this Subsection cannot be given for any year of assessment in respect of any part of the share interest or loan interest so paid by a society in that year, Section nineteen of the Finance Act, 1928 (which relates to allowance for certain purposes of interest payments as losses), shall have effect as if the society had been assessed to tax for that year under Rule 21 of the General Rules in respect of the payment of that part of the share interest or loan interest, and had paid tax under that assessment on the amount of the payment:

Provided that this Sub-section shall not apply to any loan interest in respect of or by reference to which a deduction or relief is allowable to the society otherwise than under this Sub-section.

(5) Sub-sections (1) and (2) of Section forty-one of the Finance Act, 1927 (which relate to the making and determination of claims for certain deductions of tax), shall apply to claims for relief under paragraph (a) of the last foregoing Sub-section as they apply to claims for deductions of tax and as if the Special Commissioners were the commissioners concerned, and any relief due under the said paragraph (o) may be given
either by discharge or deduction of any assessment, or by repayment, or by all or any of those means, as the case may require.

(6) On or before the first day of May in each year (commencing with the year nine teen hunderd and thirty-four), every registered society shall deliver to the surveyor for the district in which its registered office is situate a return in such form as the Commissioners of Inland Revenue may pre scribe, showing—

(a) the name and place of residence of every person to whom loan interest (being loan interest to which Sub-section (4) of this Section applies) amounting to the sum of five pounds or more has been paid by the society in the year of assessment which ended next before the said first day of May; and
(b) the amount of such loan interest paid in that year to each of those persons; and if such a return is not duly made as respects any year of assessment the society shall not be entitled to any relief under this Section in respect of any payments of loan interest which it was required to include in the return, and the amount of any relief or allowance which has been given in respect of any such payments may, if not otherwise made good, be assessed under Case VI of Schedule D and recovered from the society accordingly.

(7) For the purposes of this Section—

(a) the expression "registered society" has the same meaning as in the last preceding Section;
(b) the expression "share interest," in relation to a registered society, means any interest, dividend, bonus, or other sum payable to a shareholder of the society by reference to the amount of his holding in the share Capttal of the society;
(c) the expression "loan interest," in relation to a registered society, means any interest payable by the society in respect of any mortgage, loan, loan stock, or deposit;
(d) references to the paymentof share interest or loan interest shall include references to the crediting of such interest.—[Mr. Chamberlain.']

Brought up, and read the First time.

11.12 p.m.

Commander COCHRANE: I beg to move, in line 26, after the word" section," to insert the words:
and also on the amount of any sum not exceeding two per cent. of the Capttal of the society which the society may put to reserve out of profits of that year provided that the total reserves of the society do not exceed twenty per cent. of its Capttal.
The reason for this Amendment lies in the difficulty which my hon. Friends
and I find in accepting the full conclusions of the Raeburn Committee. In particular, we feel that the Committee's recommendation regarding the taxation of the whole of the profits of co-operative societies is illogical. I know that my right hon. Friend avoids that difficulty by saying that the "divi" is not a profit on mutual trading. He regards it as a trade expense, and regards the whole of the reserve as liable to taxation. I do not wish to go over the arguments with regard to mutual trading, which have already been put to the Committee at considerable length, but many illustrations of that trading have been given. We are familiar with the people who join together to buy a ton or so of coal, and the fortune, or misfortune, which may befall them in that regard; and I think the Financial Secretary, for purposes of illustration, took a party of co-operators for a ride in a motor omnibus; but, whatever illustration of that sort may be used, the fact remains that the principal business of these trading co-operative societies is the selling of groceries and the like across the counter, and for that purpose they do not require a very large reserve.
If that were the end of the matter, I should be the more willing to accept the view that there is a close equality between these societies and the ordinary trader, but there are three additional respects in which there is a distinction between these co-operative societies and other organisations carrying on the same trade. The first is the fact that in the co-operative society a larger proportion of the members fall below the Income Tax limit. It is, of course, true that in the ordinary trading company a number of the shareholders are probably below the Income Tax limit, but in the cooperative societies the proportion is higher than in other trading organisations. In addition, the co-operative societies act to a considerable extent as thrift societies. It is a most valuable social feature that they help people, who otherwise might not save, to save money at any rate for a few months. There is a third direction in which there is a clear distinction between a co-operative society and other trading organisations. While their share Capttal must be unlimited, it may also be liable to repayment on demand.
For these three reasons, I feel that, with regard to reserves, a co-operative society should have rather different treatment from that which is now accorded to an ordinary trading organisation. We have suggested that they should be allowed to put to reserve free of tax an amount up to a total of 20 per cent. of the Capttal of the society.
It is not possible for me to estimate what would be the Cast of this change if the Amendment were accepted. From the information which is available, and which comes in the main from the reports of the Kegistrar-General of Friendly Societies, I can do no more than make a guess, but I should put the figure at perhaps £50,000 to £100,000. I do not think it would be more because the Amendment is not intended to give any exemption to societies which have already built up large reserves. It is not intended to give an exemption to societies which have passed beyond the mutual stage. We believe that, for the purpose of carrying on mutual trade, a reserve of 20 per cent. of the Capttal is sufficient. If they care to build up reserves beyond that, it must be for some other purpose and then they should be liable to taxation. If I am right in my estimate of what this would cost the Exchequer, some £50,000, that, I think, is a measure of the small extent to which the proposals of the Government infringe the mutual principle, because, if the Amendment were adopted, I believe we should have exempted from taxation entirely all those profits which can be legitimately said to be the result of mutual trading.
In the Clause that we have just dealt with my right hon. Friend has introduced a specific definition of a "divi." I think the result of that must of necessity be that the Inland Eevenue authority, in giving exemption to these societies, will stick absolutely to the letter of that definition. It is necessary that they should do so. The result will be a number of border-line cases; cases where there is doubt whether in equity the societies should not receive a measure of relief. The Debate to-night has also raised many of the same type of cases where there is considerable doubt whether in certain circumstances relief from tax would be given to payments to hospitals or some other activity. I ask my right hon. Friend to give the matter
very careful consideration to see whether the empirical method which we suggest of a definite exemption would not overcome these difficulties. So far as our percentages are concerned, we claim no infallibility, but I am sure my right hon. Friend, if he were to agree with the object of the Amendment, would not withhold his guidance as to what would be the most appropriate figure.

11.20 p.m.

Sir A. BAILLIE: I rise to support the Amendment which has been moved by my hon. and gallant Friend the Member for Dumbartonshire (Commander Cochrane), from the wording of which it will be clear that we who are supporting it recognise that the co-operative societies, in the matter of taxation, have, in. fact, a position of privilege which has been admitted on both sides of the Committee. We think that the position should be regulated and adjusted, but that in the adjustment of this privileged position the Government should be sure that the regulation is patently equitable to all parties concerned. If, as I understand the situation, it is the intention of the Chancellor of the Exchequer to put the co-operative societies exactly on all fours with private trading or limited liability companies, and, at the same time, as was suggested by my hon. and gallant Friend, to leave those societies under statutory-limitations to which a private trading company is not subjected, the solution of this great problem cannot be called one which is patently equitable to all parties concerned. The word "equity," I have heard this afternoon, is defined in the dictionary as meaning "moral justice." I suggest to the Chancellor of the Exchequer that in his endeavour to remove-one injustice he is now creating another,. and the ordinary answer to that is that, two blacks have never made a white. Either it is a fact, or it is not, that the co-operative societies are evading or escaptng taxation by carrying on trade-which cannot be considered to be covered by the principle of mutuality. If it is a fact, surely the extent to which co-operative societies are carrying on trade outside without the principle of mutuality should be ascertained. As far as I know, that extent has not yet been ascertained, and in that respect I suggest that the-Chancellor of the Exchequer has not made out a case for the legislation which we-
are asked to support, unless, as seems to be the case, the Government have decided to jettison the principle of mutuality.

The DEPUTY-CHAIRMAN: The hon. Member cannot discuss the question of mutuality upon the Amendment which is now before the Committee.

Sir A. BAILLIE: I apologise if I have transgressed. I was only trying to point out that we have put forward the Amend-ment in an honest endeavour to meet a difficulty. It is not a destructive Amendment, but one which we hope may be considered as constructive. The principle of mutual trading was described by the hon. Member for Stockton-on-Tees (Mr. Macmillan) as one of fiscal convenience. I venture to cross swords with him upon that definition. In point of fact, the principle of mutual trading is the principle upon which, the co-operative movement has been built for a generation or more and which has been supported by numerous Chancellors of the Exchequer, Law Officers of the Crown, and other high authorities in the past.

The DEPUTY-CHAIRMAN: The hon. Member is now discussing a point on which the Committee has already come to a decision. He must confine himself to the Amendment as to whether a certain proportion of the reserves should be exempt from taxation.

Sir A. BAILLIE: I must again apologise, and I will endeavour to confine myself strictly to that point. I will content myself by saying that in this Amendment we think we have found an equitable solution of this long and bitterly fought conflict. We believe that the Amendment will safeguard the principle of mutuality while at the same time it will be a more effective safeguard of the other principle which we seek to protect. I regret that the arguments that I have been attempting to adduce in order to commend our Amendment are out of Order. We do not consider that the percentages indicated in the Amendment are sacrosanct, but we put them forward as a constructive solution of the impasse and we hope that even at this late stage the principle of our Amendment will commend itself to the Chancellor of the Exchequer.

11.27 p.m.

Viscountess ASTOR: I hope the Chancellor of the Exchequer will accept the Amendment. By now I think he must have seen that there is a great body of opinion in the House which supports the National Government, even Tories of Tories, who feel that, although there may be some justification for what the Government are doing, it is not very popular. I am not running away from my position, but I am certain that there is a great body of opinion which thinks that the Government are going too far.

The DEPUTY-CHAIRMAN: The hon. Lady must confine herself to the Amendment.

Viscountess ASTOR: May I not give reasons why I am appealing to the Chancellor of the Exchequer? It would be a great relief if he could accept the Amendment. The whole thing pleases no one. The Government are getting little money out of it, and they have not proved that they need the money. We are afraid that the Government are not taking the right course in regard to the Co-operative Movement. We believe in the Cooperative Movement for reasons very different from those which influence hon. Members above the Gangway. We believe in it because we believe that it will kill the Socialist movement, but they believe in it because they think that it will give funds to the Socialist movement. Co-operation and Socialism cannot go together, can they Captain Bourne?

The DEPUTY-CHAIRMAN: Whether that is true or not, this is not the moment to discuss it.

Viscountess ASTOR: They are fundamentally different. Co-operation is a Capttalistic trading society, which has its roots in the country. It is one of the very best movements, while Socialism is an economic policy which has never been proved.

The DEPUTY-CHAIRMAN: The hon. Lady must confine herself to the Amendment, which has nothing to do with the merits of Socialism or co-operation.

Viscountess ASTOR: I beg the Chancellor of the Exchequer to please his many supporters and backers, and admirers, by accepting the Amendment. We admire his courage and his directness.
After all he has faced this problem while many others have only been playing a political game. Strong men are not afraid to give in. It is not too late even now, and he would bring great joy to many Members of the House of Commons and to thousands of co-operators in the country, who detest the political side of the co-operative movement and who desire to back the National Government.

11.31.p.m.

Captain A. RAMSAY: I desire to associate myself with the hon. Member who has moved the Amendment, and I hope that he will press it to a Division. Those of us who have opposed this legislation a little more whole-heartedly than the hon. Member feel that if the Amendment is accepted a great deal of what we believe to be an injustice will be removed. It cannot be said with any accuracy that all these reserves represent taxable money, and the proportion suggested would in our opinion exempt most of the non-taxable money. If the Amendment is refused it will not be unjust if people in the country say that a definite tax has been put upon thrift. But if the right hon. Gentleman cannot accept the Amendment I hope he will make some modification in the Bill which will allow that a reasonable proportion of money, which is the outcome of mutuality alone, shall not be taxed merely because it has not been distributed, but has been used in an ordinary sound financial policy strictly related to mutuality.

11.32.p.m.

Mr. STEVENSON: I support the Amendment, and I do so although I approve whole-heartedly of the attitude of the Chancellor of the Exchequer in reference to co-operative societies. I support the Amendment for this reason. I realise the tremendous benefits of cooperative societies when confined to their own purposes, and I should be sorry indeed if the Legislature rendered it impossible for other similar societies to grow up. If a body of men and women who 'proposed to form a co-operative society found that they would have to pay the full rate of taxation on all their profits, they would think twice before they started such a society; and, in addition, if the Amendment were accepted any society which would be started in the future would be a proper mutual
trading society. The Chancellor of the Exchequer has rather mistaken the situation when be compares co-operative societies with ordinary incorporated companies. There is a considerable difference. The functions of a co-operative society are in some ways more limited and in other ways more extended. A cooperative society must accept any person as a member, and must accept whatever his share Capttal may be.
Further, every co-operative society must have a certain percentage of its funds in liquid form, so that it can repay its depositors at once. Therefore, it is necessary that such societies should have every encouragement from the Government, and should be in a position to carry on its trade properly. It can do so if it is allowed to accumulate tax free a reasonable percentage to carry on its work. If, after having got that percentage, all the projects made belong to the shareholders or the contributors as individuals, then it is a proper cooperative society. In other words, the co-operators are deriving the whole of the benefit from their mutual trading. Such a society would differ from many of the big industrial concerns. I ask the Chancellor of the Exchequer to consider the difference between a co-operative society and the ordinary incorporated company, and if he would give effect to the Amendment the revenue would not suffer to any considerable extent.

11.36 p.m.

Mr. O'CONNOR: I take a somewhat different view from that which has been disclosed by hon. Friends of mine who support this Amendment, but at the same time I think that from another point of view there is a good deal to be said in favour of the proposition of the Amendment. I do not agree with my hon. Friends at all that the measures that the Chancellor of the Exchequer is taking now are in any way unfair, or that they unduly infringe the principle of mutual trading. I gave my general views on the subject on another occasion. One of the subjects that concerned me not a little when I saw the members of my own co-operative society was that co-operative societies are under certain quasi-statutory obligations in the way of putting money aside for the purpose of reserve. They have to submit their rules to the Registrar of Friendly
Societies, and they have to submit to a kind of audit which no public company has to bear. That puts them in a different position from an ordinary public company.
Although I do not think that the rigid form of this Amendment is quite the right way in which to do it, I do suggest to the Chancellor of the Exchequer that it might be possible between now and Report to look into the matter with a view of seeing whether it is possible, by way perhaps of reducing the standard rate of tax upon all such portion of the reserve as represents compliance with some statutory order or some order of the Chief Registrar, to recognise that this obligation rested on these societies. I do not think there is any way in which the Chancellor of the Exchequer can better give effect to what, I am sure, is in his own mind. I am certain that he has not, and never has had, any intention of penalising the principle of mutuality. If by some steps of the kind suggested in the Amendment it is possible to show in a practical way that the exceptional circumstances in which the co-operative societies find themselves in regard to reserves were recognised, it would be giving effect to the generosity and the fairness with which we all desire to see these societies treated.

11.40 p.m.

Mr. HORE-BELISHA: Anyone who has listened to this Debate will realise the Sincerity and conviction that lie behind the Amendment. The Mover appreciated that he was trying to differentiate between the co-operative society and the trading company in the terms to be given to them in relation to this matter, and he sought to define the differences which he claimed existed between the two. He said there were three main differences. The first was in the status of the members. He told the Committee that the Majority of the members of the co-operative societies were below the Income Tax limit. So may be the shareholders in any trading company. Tax is exacted in two parts, if I may put it in colloquial language. There is the tax exacted from the individual and the tax imposed upon the company. The company pays tax upon its reserves at the standard rate,
irrespective of the status of the shareholders. They may all be above the Super-tax limit or they may all be below the ordinary Income Tax limit; the company pays at the standard rate.

Commander COCHRANE: I thought I made it clear that it was merely a question of proportion. It was clearly not a question of principle on that point. In the co-operative societies, the proportion of those below the Income Tax level is higher than it is in the other case.

Mr. HORE-BELISHA: The question of proportion is not of importance. The fact is that the company pays Income Tax at the standard rate, irrespective of the proportion of its shareholders who may be above or below the Income Tax level, and so it is with the society. The second ground for differentiation suggested by my hon. and gallant Friend was the ground of thrift. There are many forms of thrift. Some of them may be more or less commendable than membership of a co-operative society. It is reasonable for persons to combine for the purpose of buying goods cheaply, and in so far as the member of a co-operative society has dividends returned to him, having the effect of giving him goods more cheaply, he has the full advantage of his thrift. But in so far as the co-operative society, as an incorporated entity, retains reserves, then those reserves as they are accumulated and put in that position are subject to tax. There is no principle of thrift impaired in that proposition. My hon. and gallant Friend's third ground of differentiation was that the societies had to repay upon demand.

Commander COCHRANE: They may have to do so.

Mr. HORE-BELISHA: That is a different point. My hon. and gallant Friend says they may have to repay upon demand the share Capttal of their shareholders. That depends on the rules made by the society itself. A society is not compelled by law to repay its shareholders on demand; Therefore, I submit to my hon. and gallant Friend that the three grounds on which he sought to differentiate the societies from trading companies fail. My hon. and learned Friend the Member for Central Nottingham (Mr. O'Connor) suggested a further
ground for differentiation. He said that the societies, being incorporated under the Industrial and Provident Societies Act, had certain disabilities. I would prefer to say that they had certain privileges. They are not bound to incorporate themselves under these Acts at all. They incorporate themselves because it is cheaper, but, if they so desired, they could incorporate themselves under the Companies Act, and they would then have none of the privileges which they now enjoy, so that they have a distinct advantage in being able to incorporate themselves under these Acts.
I do not think those who have argued this Amendment, clear as they have been, have made out to the Committee sufficient reason why we should differentiate between the trading profits of a company and those of a co-operative society. If they had made out that case, every argument which they have used would have been an argument for exempting, not as they here ask, 2 per cent. of the amount put to reserve, but everything put to reserve. Why stop at 2 per cent.? If the Committee were convInced that my hon. Friends had made out a case, the whole of the proposal of the Government would fall to the ground. The case of the Government is that there is no distinction in principle to be drawn between the amounts put to reserve by co-operative societies engaged in trading and the amounts put to reserve by ordinary companies. They work on the same basis, they deal with the same commodities, and they are in every respect similar; and so I would ask my hon. Friends to withdraw the Amendment, failing which I would ask the Committee at any rate not to accept it.

Question put, "That those words be there inserted."

The Committee proceeded to a Division.

There being no Members willing to act as Tellers for the" Ayes,"the CHAIRMAN declared the" Noes"had it.

NEW CLAUSE.—(Period of licence in case of specially mechanically propelled vehicles.)

(1) The minimum period prescribed by order under Section twenty-two of the
Finance Act, 1921 (which provides for the taking out of licences in respect of certain nechanically propelled vehicles for periods of the year), may be shorter in the case of vehicles to which this Section applies than in the case of other vehicles.

(2) This Section applies to vehicles which—

(a) are authorised to be used on roads by virtue of an order made under Section three of the Road Traffic Act, 1930; and
(b) exceed such weight (not being less than eleven tons) as may be prescribed by order made under the said Section twenty-two; and
(c) are chargeable with duty under paragraph 5 of the Second Schedule to the Finance Act, 1920.

(3) This Section shall come into operation on the first day of January, nineteen hundred and thirty-four.—[Mr. Stanley.']

Brought up, and read the First time.

The MINISTER of TRANSPORT (Mr. Oliver Stanley): I beg to move, "That the Clause be read a Second time."
This new Clause deals with a point which is also raised in a new Clause down in the name of the hon. Member for Wrexham (Mr. A. Roberts). As things are, a vehicle operating under a special order, that is to say an outsize vehicle over the maximum, will have to pay tax at a very heavy annual rate. But, if that vehicle is not operating except on infrequent occasions and it is necessary to pay tax for the whole year, it would amount to a very heavy tax in proportion to its use. The Minister has power to prescribe a period during which licences may be issued, but I am advised it is necessary for me, in the exercise of such powers, to apply such exemption to all motor vehicles without differentiation. Therefore, if I wanted to prescribe a shorter period for these special cases, I should have to apply it to all motor vehicles. The effect of this Amendment is to give me power to prescribe shorter periods for some vehicles than for others. If given this power, I propose to issue an Order which would enable me to grant all these heavy vehicles licences for a minimum period of 15 days subject to a surcharge of 10 per cent.

Mr. ALED ROBERTS: As a similar Clause appears later in the names, of some of my hon. Friends and myself, I wish to thank the hon. Gentleman and the Government for having dealt with the matter and to say that, while it does not give us everything we expected, it
gives us 15 days as a minimum and a 10 per cent. extra tax, which will be a help to the very heavy traffic with which it deals.

Sir JOSEPH NAIL: While I appreciate the motive that led my hon. Friend to put the Clause on the Paper and while I appreciate that in the circumstances of the case he may desire to make these Orders, I wish to put on record that in my view it is a bad principle to enable heavy vehicles to be licensed not for a year but for a short period, particularly vehicles which may do the maximum of damage to the roads over which they travel. The whole system of granting short period licences is wrong. I would prefer to go to the other extreme and require that no licence should be issued for less than 12 months.

Clause added to the Bill.

Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.—[Captain Margesson.]

Committee report Progress; to sit again To-morrow.

The remaining Orders were read, and postponed.

It being after Half-past Eleven of the Clock, Mr. SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.

Adjourned accordingly at Four Minutes before Twelve o'Clock